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    suman choudhary
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    The CFO of a carpet manufacturing company has recommended closing their California plant due to excess capacity and slow housing market demand. The president has asked for a report justifying this recommendation. The summary should include: 1) The Georgia plant is newer with higher productivity while the California plant has higher labor costs, including a $4/hour wage difference between the union and non-union plants. 2) Closing the California plant would save $1 million in annual labor costs, $120,000 in local taxes, and yield over $1 million from selling the land, while incurring a one-time $250,000 closing cost. 3) Transferring 5 workers to Georgia, hiring 45 more

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    The CFO of a carpet manufacturing company has recommended closing their California plant due to excess capacity and slow housing market demand. The president has asked for a report justifying this recommendation. The summary should include: 1) The Georgia plant is newer with higher productivity while the California plant has higher labor costs, including a $4/hour wage difference between the union and non-union plants. 2) Closing the California plant would save $1 million in annual labor costs, $120,000 in local taxes, and yield over $1 million from selling the land, while incurring a one-time $250,000 closing cost. 3) Transferring 5 workers to Georgia, hiring 45 more

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    76 views2 pages

    Assignment 3 - Report Writing

    Uploaded by

    suman choudhary
    The CFO of a carpet manufacturing company has recommended closing their California plant due to excess capacity and slow housing market demand. The president has asked for a report justifying this recommendation. The summary should include: 1) The Georgia plant is newer with higher productivity while the California plant has higher labor costs, including a $4/hour wage difference between the union and non-union plants. 2) Closing the California plant would save $1 million in annual labor costs, $120,000 in local taxes, and yield over $1 million from selling the land, while incurring a one-time $250,000 closing cost. 3) Transferring 5 workers to Georgia, hiring 45 more

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    Assignment 3 - Report Writing

    Expected output - Level 3 report - Title page, Table of Contents, Executive


    Summary, Report Proper.

    Report to be based on situation of the carpet company given below. You may give the
    company any name of your choice.

    Read the situation through, right till the bullet points under "Additional Information", and
    create the report.

    The Carpet Manufacturing Company

    Three years ago, your company (a carpet manufacturer) modernized its Georgia plant in
    anticipation of an increasing demand for carpets. Because of the depressed housing market,
    the increase in demand for new carpets has been slow to materialize. As a result, the
    company has excess capacity at both its Georgia and California plants. You, Anita Simson,
    are the CFO of the company. On the basis of your research, you have recommended that the
    company close the California plant.

    J.P. Lawrence, the company president, has asked you to prepare a justification report to
    support your recommendation.

    Given below are the facts you gathered by interviewing the respective plant managers.

    Operational Statistics

     Georgia plant: This plant has newer equipment, has higher productivity, employs 100
    nonunion production workers and ships $12 million in carpets a year; hourly base
    wage is $16.
     California plant: This plant employs 80 union production workers and ships $8 million
    in carpets a year; hourly base wage is $20.

    Financial Implications

     Savings by closing California plant: (1) increase productivity by 17% (2) reduce
    labor costs by 20% (total labor savings would be $1 million per year ; see additional
    information below); (3) save annual local tax of $120,000 (Georgia has a more
    favorable tax climate)
     Sale of Pomona, California, land: Purchased in 1952 for $200,000. Current market
    value $2.5 million. Net profit (after capital gains tax) over $1 million.
     Sale of plant and equipment: Fully depreciated; any proceeds a windfall.
     Costs of closing California plant: One-time deductible charge of $250,000 (relocation
    costs of $100,000 and severance payments totaling $150,000)

    Additional Information

    - You may
     Transfer five workers from California to Georgia
     Hire 45 new workers in Georgia
     Lay off 75 workers in California
    - Georgia plant would require a total of 150 workers to produce the combined volume
    of both plants.

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