Discontinue Decision

Tags

finance

The decision to stop/[see page 24, discontinue] a product-line.

In the example take note of how if we remove one line we apportion the fixed costs between the remaining two products and lead to lower profit for all 3 product lines.

For this decision we must also consider: Whether the facilities used for the product can/cannot be used for other products. Even if the facilities cannot be used so long as their inclusion helps cover in fixed costs and leads to net positive profit then they should be included. If the facilities can be used for something else, it's worth considering the [see page 29, opertunity-cost] of not using them to make another product.