Plant Shutdown or Continue Operations, Qualitative Considerations, Traditional Analysis KartAuto Corporation manufactures automobiles, vans, and trucks. Among the various KantAuto plaints around the United States is the Bloomington plant, where vinyl covers and upholstery fabricare sewn. These are used to cover intenor seating and other surfaces of KarlAuto products, Pam Tegin is the plant manager for the Bloomington cover plant--the first KarlAuto plant in the region. As other area plants were opened, Tegin in recognition of her management ability, was given the responsability to manage them. Toegin functions as a regional manager, although the budget for her and her staff charged to the bloomington plant Toegin has just received a report indicating that Kaiuto could purchase the entire annual output of the Bloomington cover plant from outside suppliers for $37 million. Teepin was astonished at the low outside price, because the budget for the Bloomington plant's operating costs was set at $56,45 million. Tegin believes that the Bloomington plant will have to close down operations in order to realize the $24.45 million in annual cost savings The budget (in thousands) for the Bloomington plant's operating costs for the coming year follows: Materials Labor: $12,000 Direct $13,800 Supervision 3,750 Indirect plant 4,300 21,850 Overhead: $5,000 Depreciation--equipment Depreciation-building 3,000 Pension expense 5,600 Plant manager and staff 3,000 Corporate allocation 6,000 22,600 Total budgeted costs $56,450 Due to the Bloomington plant's commitment to use high-quality fabrics in all of its products, the Purchasing Department was instructed to place blanket orders with major suppliers to ensure the receipt of sufficient materials for the coming year. If these orders are canceled as a consequence of the plant dosing, termination charges would amount to 18 percent of the cost of direct materials Approximately 600 blont employees will lose their jobs if the plant is closed. This includes all direct laborers and supervisors as well as the plumbers, electricians, and other skilled workers classified as indirect plant workers. Some would be able to find new jobs, but many others would have dificulty. All employees would have difficulty matching the Bloomington plant's base pay of 529.40 per hour, the highest in the area. A cause in the bloomington plant's contract with the union may help some employees; the company must Druvide employment assistance to its former employees for 12 months after a plant closing. The estimated cost to administer this service would be 51 million for the year Some employees would probably elect early retirement because the company has an excellent pension plan. In fact, 54.6 million of next year's pension perse would continue whether or not the plant is open Teegin and her staff would not be affected by the closing of the Bloomington plont. They would still be responsible for administering three other area plants. opment depreciation for the plant is considered to be a variable cost and the units of production method is used to depreciate equipment, the Bloomington plant is the only Kaiuto plant to use this deprecation method. However, it was the customary straight line method to depreciate its building Required: Prepare a quantitative analysis to help in deciding whether or not to close the Bloomington plant. Enter alt answers as positive amounts. If an amount box does not require an entry, enter *O* for your answer. Enter all amounts in thousands. For example, $1 million would be entered as "3,000", KarlAuto Corporation Quantitative Analysis Continue Operations Plant Shutdown Cost Item (Make Cover) (Buy Cover) First year (in thousands): Materials Labor Pension expense Cost of buying Total relevant costs Following years in thousands) Materials QILI! Qui! Omni in Labor Pension expense Cost of buying Total recurring costs