Permanent abandonment of premises, Managerial Accounting

PERMANENT ABANDONMENT OF PREMISES

A company may find it more profitable to concentrate its output in some factories by closing down others.  The decision, in this instance, is made on the basis of incremental costs and will depend on that combination of resources which yields the greater overall group profit. The permanent closure of a factory saves fixed cost expenditure and also frees capital (by the sale of assets) for alternative investment, as well as providing the opportunity to take advantage of low marginal costs elsewhere. It is possible that the sale of freehold land and buildings could provide considerable investment funds free of interest which would make the abandonment particularly attractive. This has been demonstrated effectively by asset stripping following a successful takeover.

There may be a high social cost in a factory closure which is difficult to evaluate, but in any case it will be borne by the whole community rather than the individual manufacturer. A growing awareness of the social consequences which follow factory closures may persuade politicians that the cost to the community represents a hidden subsidy to the profits of an individual company. A tax or other deterrent for such cases in the future would be an additional cost of abandonment decisions and so make it relatively less profitable to close a factory.

Posted Date: 12/5/2012 7:47:47 AM | Location : United States







Related Discussions:- Permanent abandonment of premises, Assignment Help, Ask Question on Permanent abandonment of premises, Get Answer, Expert's Help, Permanent abandonment of premises Discussions

Write discussion on Permanent abandonment of premises
Your posts are moderated
Related Questions
Explain the Ratio analysis according to kosher A ratio is the relation of the amount a to another b expressed as the ratio of a to b; a: b (a is to b) or a as simple fraction i

Recommend whether marginal or absorption costing should be use for internal monthly reporting

Describe the Limitations of management accounting: 1. Based on accounting information: the correctness and effectiveness of managerial decisions will depend upon the quality

Tom Emory and Jim Morris strolled back to their plant from the administrative offices of Ferguson & Son Manufacturing Company. Tom is manager of the machine shop in the company''s

Number of Operating Cycles: The number of operating cycles in a period is determined by dividing the number of days in a year i.e.365 by the length of net operating cycle. Express

using the operating cycle and any other financial management knowledge,discuss the applicabilty of such cycle to poultry

I need help making sure I did my accounting assignment correctly

Change of Technology: Changes in technology commonly leads to improvements in the efficient processing of raw material, reduce in wastages, more speedy production and higher produ

Directing There are number of good plans which are never realized. To realize a plan it requires the initiation and   direction of the number of actions. Often, thes

When the customers of the company are spread over broad geographical areas then in place of a particular collection centre the company opens collection centres at the regional stag