Wexford Manufacturing and Mining (WMM) operates several factories in three western states: Arizona, Montana, and Utah. WMM's home office is located in Idaho. All three factories produce the same product and Wexford's management believes it can operate more efficiently by closing one of the three factories. The financial staff at Wexford has put together an estimate (in thousands of dollars) of operations for the upcoming fiscal year: The sales price per unit is $250. Looking at the financial statement, the results in the Montana factory seem troubling. WMM management has decided, as a result, to sell that factory's machinery and equipment and stop manufacturing by the end of this year. WMM expects that the proceeds from the sale of these assets would equal all termination costs. WMM, however, would like to continue serving most of its customers in that area If it is economically feasible and is considering one of the following three alternatives: - Expand the operations of the Utah factory by using space presently idle. This move would result in the following changes in that factory's operations: Increase over Utah's factory's current operations Under this proposal, variable costs would be $100 per unit sold. - Enter into a long-term contract with a competitor that will serve that area's customers. This competitor would pay WMM a royalty of $105 per unit based on an estimate of 30,000 units being soid. - Close the Montana factory and not expand the operations of the Utah factory. Total allocated corporate costs of $10,400,000 will remain the same if the Utah factory is expanded (the first alternative above). If a competitor is used to serve the Montana market (the second alternative above), 65 percent of the corporate cost allocated to the Montana factory will be saved. If the Montana factory is closed and the Utah factory's operations are not expanded (the third aitemative above), 80 percent of the corporate cost allocated to the Montana factory will be saved. Required: To assist the management of WMM, prepare a schedule computing WMM's estimated operating profit from the following option: a. Expansion of the Utah factory. b. Negotiation of the long-term contract on a royalty basis. c. Shutdown of the Montana operations with no expansion at other locations. Complete this question by entering your answers in the tabs below. Negotiation of the long-term contract on a royalty basis. (Enter your answers in thousands. (i.e, 5,400,000 should be entered as 5,400).) To assist the management of WMM, prepare a schedule computing WMM's estimated operating profit from the following option: 2. Expansion of the Utah factory. b. Negotiation of the long-term contract on a royalty basis. c. Shutdown of the Montana operations with no expansion at other locations. Complete this question by entering your answers in the tabs below. Expansion of the Utah factory. (Enter your answers in thousands. (i.e., 5,400,000 should be entered as 5,400).) Required: To assist the management of WMM, prepare a schedule computing WMM's estimated operating profit from the following option: 9. Expansion of the Utah factory. . Negotiation of the long-term contract on a royalty basis. c. Shutdown of the Montana operations with no expansion at other locations. Complete this question by entering your answers in the tabs below. Shutdown of the Montana operations with no expansion at other locations. (Enter your answers in thousands. (i.e,, 5,400,000 should be entered as 5,400 ).)
