QualSupport Corporstion manufoctures seats for outomobiles, vans, trucks, and vorious recreationsl vehicles. The company has a number of plants around the world, including the Denver Cover Plant, which makes seat covers. Ted Vosilo is the plant monoger of the Denver Cover Plant but also serves as the regional production manuger for the company. His budget as the regional manager is charged to the Denver Cover Plant. Vosilo has just heard that QualSupport has received o bid from an outside vendor to supply the equivalent of the entire annual output of the Denver Cover Plant for $20.72 million. Vosilo wos astonished at the low outside bid because the budget for the Denver Cover Plont's operating costs for the upcoming year was set at $24.02 million. If this bid is occepted, the Denver Cover Plont will be closed down. The budget for Denver Cover's operating costs for the coming year is presented below. *Fixed corporate expenses allocated to plants and other operating units bosed on total budgeted woge ond salary costs. Additionsl focts regording the plont's operotions ore as follows: a. Due to Denver Cover's commitment to use high-quality fobrics in all of its products, the Purchasing Department was instructed to place blanket purchose 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 closing, termination charges would amount to 25% of the cost of direct materisls. b. Approximstely 340 plant employees will lose their jobs if the plant is closed. This includes all of the direct laborers and supervisors as well os the plumbers, electricions, and other skilled workers classified as indirect plont workers. Some would be able to find new jobs while many others would have difficulty. All employees would hove difficulty matching Denver Cover's bose pay of $12.80 per hour, which is the highest in the oreo. A clause in Denver Cover's controct with the union moy help some employees; the company must provide employment assistence to its former employees for 12 months after o plant closing. The estimoted cost to administer this service would be $0.76 million for the yeor. c. Some employees would probably choose esrly retirement becouse QualSupport has an excellent pension plan. In fact, \$0.64 million of the annual pension expense would continue whether Denver Cover is open or not. d. Vosilo and his staff would not be affected by the closing of Denver Cover. They would still be responsible for administering three other areo plants. e. If the Denver Cover Plant were closed, the company would realize about $1.75 million salvage value for the equipment and building. If the plant remains open, there are no plans to make ony significant investments in new equipment or buildings. The old equipment is odequate and should last indefinitely. Required: 2. QualSupport Corporation plans to prepore a financial analysis that will be used in deciding whether or not to close the Denver Cover Plant. Management has asked you to identify: o. The annusl budgeted costs that are relevont to the decision regording closing the plant. b. The onnusl budgeted costs that are not relevont to the decision regarding closing the plant. c. Any nonrecurring costs that would arise due to the closing of the plant. 3. Looking ot the dats you hove prepared in (2) sbove. a. Colculate the financial advantage (disodvantege) of closing the plant. b. Should the plant be closed