Make or Buy - Mobile Seat Corporation

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Mobile Seating Corporation

Managerial Accounting Case Report

Dr. Gary Saunders

Outline

I. Introduction

II. Advantages of Keeping Greenville Cover Plant

III. Relevant Costs and Non-Relevant costs

IV. Non-Recurring Costs

V. Desicion Making Costs

VI. Revenues or Costs Important for Desicion Making

VII. Conclusion

Introduction

Mobile Seating Corporation is a company with several manufacturing plants. The operating costs for the plant are $24.3 million and they’ve received a bid of an outside vendor to supply the amount of an annual output for $21 million.

The purpose of this report is to help Miriam Restin, Greenville Cover Plant’s Manager, to decide whether to continue operations at the Greenville Cover Plant or to accept the bid and shut down the plant.

Based on the information given, we have identified which costs can be avoided by closing the plant and which ones are relevant to our decision.

When analyzing the plant closing decisions, we have to consider the characteristics on size, reputation and diversification that may affect the decision and the impact they’ll have on the company itself.

Although the outside supplier’s bid is of $21 million dollars, making it an impossible to refuse offer, since it’s $3.3 million dollars less than the actual annual budget for next year, this shouldn’t immediately influence the decision of Mrs. Restin of whether Greenville Cover Plant should be shut down or not.

Advantages of Keeping Greenville Cover Plant

Buying covers from an external provider can be more cost effective for the Mobile Seating Corporation, but before starting our cost analysis there are some points which should be considered.

There are a few advantages for Mobile Seating Corporation on keeping the Greenville Plant. By keeping the Greenville Plant, Mobile Seating Corporation will have more flexibility and control over production...