LYRIX Panels Inc. (LPI) is a manufacturer of speciality panels, it also sells solar panels and...

 

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LYRIX Panels Inc. (LPI) is a manufacturer of speciality panels, it also sells solar panels and miscellaneous tools for installing all types of panels. Sales have increased each year based, in part on the company's excellent record of customer service and reliability. The industry has continued to grow as outsourcing to cost efficient companies, like LPI. To take advantage of lower wage rates and favourable business environments LPI has also located plants in seven (7) other countries. One of the plants is Mile High Metals Ltd. (MH), which was its first plant. The company makes metal frames for solar panels. Jeannie Dream is the plant manager, but she manages other plants as well. The budget for him and his staff are charged to MH. Jeannie has just come back from Head Office and LPI is considering purchasing the total output from an outside source for 60 million. Jeannie was totally taken back by the outside price considering operating costs for the coming year was 90 million. She believes that LPI will close MH to realize the 30 million in annual cost savings. MH's budget for operating costs for the upcoming year are as follows: Mile High Metals Inc. Budget for Operating Costs for the year ending December 31, 2020 Direct Materials $ 35,000,000 Labour $ 25,000,000 $ 4,500,000 $ 4,500,000 $ 34,000,000 Direct Materials Supervision Indirect Plant Overhead Depreciation - Equipment Depreciation - Building Pension expense Plant Manager and staff $ 5,500,000 $ 2,500,000 $ 5,500,000 $ 1,750,000 $ 5,750,000 $21,000,000 Corporate Allocation Total Budget Costs $ 90,000,000 Additional Information: The commitment to high quality materials, made purchasing place blanket purchase orders to secure material for the upcoming year. If the orders were cancelled there was a restocking fee of 17.5% of the cost of the direct materials. Approximately 200 plant employees would lose their job if the plant were closed. The town has a population of 5,000 people. The includes direct labourers and supervisors as well as maintenance and other skilled works classified as indirect labour. Some would find jobs others would have a hard time. All employees would have hard time matching the union pay. In the contract there is support for workers up to one year after a plant closure. This cost is $1,500,000 for the year. Some employees may take an early retirement. The pension plan is very good and 3.5 million of the 2020 would continue if MH would be closed. Jeannie Dream and her staff would not be affected by the plant closure. MH uses the straight-line method to depreciate its building and the units of production method for its equipment. The CFO must prepare an analysis to indicate should LPI close the plant, or not (make or buy) using only relevant factors. Also consider ONT competitive strategy and how this should be considered in the decision of Mile High Panels Inc. In addition, specifically identify the key strategic factors that would be considered in this decision. The CFO must prepare an analysis to indicate should LYRIX Panels Inc. close the plant, or not (make or buy) using only relevant factors. Also consider LPI competitive strategy and how this should be factored in the decision of Mile High Metals Inc. Specifically identify at least four (4) key strategic factors that would be considered in this decision. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). LYRIX Panels Inc. (LPI) is a manufacturer of speciality panels, it also sells solar panels and miscellaneous tools for installing all types of panels. Sales have increased each year based, in part on the company's excellent record of customer service and reliability. The industry has continued to grow as outsourcing to cost efficient companies, like LPI. To take advantage of lower wage rates and favourable business environments LPI has also located plants in seven (7) other countries. One of the plants is Mile High Metals Ltd. (MH), which was its first plant. The company makes metal frames for solar panels. Jeannie Dream is the plant manager, but she manages other plants as well. The budget for him and his staff are charged to MH. Jeannie has just come back from Head Office and LPI is considering purchasing the total output from an outside source for 60 million. Jeannie was totally taken back by the outside price considering operating costs for the coming year was 90 million. She believes that LPI will close MH to realize the 30 million in annual cost savings. MH's budget for operating costs for the upcoming year are as follows: Mile High Metals Inc. Budget for Operating Costs for the year ending December 31, 2020 Direct Materials $ 35,000,000 Labour $ 25,000,000 $ 4,500,000 $ 4,500,000 $ 34,000,000 Direct Materials Supervision Indirect Plant Overhead Depreciation - Equipment Depreciation - Building Pension expense Plant Manager and staff $ 5,500,000 $ 2,500,000 $ 5,500,000 $ 1,750,000 $ 5,750,000 $21,000,000 Corporate Allocation Total Budget Costs $ 90,000,000 Additional Information: The commitment to high quality materials, made purchasing place blanket purchase orders to secure material for the upcoming year. If the orders were cancelled there was a restocking fee of 17.5% of the cost of the direct materials. Approximately 200 plant employees would lose their job if the plant were closed. The town has a population of 5,000 people. The includes direct labourers and supervisors as well as maintenance and other skilled works classified as indirect labour. Some would find jobs others would have a hard time. All employees would have hard time matching the union pay. In the contract there is support for workers up to one year after a plant closure. This cost is $1,500,000 for the year. Some employees may take an early retirement. The pension plan is very good and 3.5 million of the 2020 would continue if MH would be closed. Jeannie Dream and her staff would not be affected by the plant closure. MH uses the straight-line method to depreciate its building and the units of production method for its equipment. The CFO must prepare an analysis to indicate should LPI close the plant, or not (make or buy) using only relevant factors. Also consider ONT competitive strategy and how this should be considered in the decision of Mile High Panels Inc. In addition, specifically identify the key strategic factors that would be considered in this decision. The CFO must prepare an analysis to indicate should LYRIX Panels Inc. close the plant, or not (make or buy) using only relevant factors. Also consider LPI competitive strategy and how this should be factored in the decision of Mile High Metals Inc. Specifically identify at least four (4) key strategic factors that would be considered in this decision. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).