ACCA PM Chapter 9 - SHORT-TERM DECISION MAKING - Shutdown Problems

Shutdown Problems


Calculate the effect on current profit to decide whether or not to close part of the business:

Stop Product A:

• Lose Contribution: (15000)
• Save Fixed Costs:  5000

Do Product B:

• Extra Contribution: 20000
• Extra Fixed Costs: (6000)

Effect on Current Profit: +4000

In conclusion, we should stop Product A and do Product B.

Source: https://opentuition.com/acca/pm/short-term-decision-making-shutdown-problems-acca-performance-management-pm/