Operational Statistics Georgia plant: This plant has newer equipment, has higher productivity, employs 100 nonunion production...

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: California 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) increased productivity by 17%; (2) reduce labor cost by 20% (total labor savings would be $1 million per year; see assumptions); (3) annual local tax savings of $120,000 (Georgia has a more favorable tax climate)

Sale of Pomona, California, land: purchased in 1952 for $200,000 capital, 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

Cost of closing California plant; one-time deductible charge of $250,000 (relocation cost of $100,000 and severance payments totaling $150,000)

Assumptions

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

List some conclusions you might draw from the preceding information to use in your report.

Expert Solution

ekkarill92 answered 2 years ago

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