Temporary closure of factory or department, Managerial Accounting

TEMPORARY CLOSURE OF FACTORY OR DEPARTMENT

Here there is a similar situation to that of discontinuance of a product such as Model N40. A factory which is expected to earn some contribution should continue in operation rather than be shut down. However, if the factory is part of a group, the decision is quite different when the output from the closed factory is not lost but transferred to another factory in the group with spare capacity. For example, a temporary fall in the sales volume of a company's products may result in either of two factories being capable of satisfying the expected demand. In this situation the company can optimize its profits by concentrating production in that factory which has the lowest marginal costs. In reaching a decision, consideration should be given to predictable cost changes generated by the decision: such as additional distribution costs, care and maintenance of the closed premises, restarting costs, and any fixed cost savings such as salaries in the closed factory.

Posted Date: 12/5/2012 7:46:17 AM | Location : United States







Related Discussions:- Temporary closure of factory or department, Assignment Help, Ask Question on Temporary closure of factory or department, Get Answer, Expert's Help, Temporary closure of factory or department Discussions

Write discussion on Temporary closure of factory or department
Your posts are moderated
Related Questions
STEPS OF DEVELOPING A COST ESTIMATING RELATIONSHIP Firmly speaking, a CER is not a quantitative method. It is a framework for using suitable quantitative methods to quantify a

Strengths and weakness of net book value and pay back method

Computing equivalents units and assigning costs to completed units and ending work in process; no beginning inventory or cost transferred in (30 -45min) Sue Electronics makes CD p

Calculate Transfer Price - Management Control System? Question: Compute the Transfer Price for Product X and Y and the Standard Cost of Product Z as the intra company pricing r

Capital gearing ratio  The term capital gearing is used to describe the relation ship between equity share capital including reserves and surplus to preference share capital a


Analysis of Credit File: Credit file is a compilation of each the relevant credit information of the customer. All the credit information collected throughout the credit informati

FLEXIBLE BUDGETING Flexible budget may be used in one of two ways: Planning and Control. At the planning stage when budgets are set, to reduce the effect of uncertainty. For ex

companyXYZusesthe job oder costing system.

What is Fixed budget The fixed budget is prepared for a given level of activity the budget is prepared before the beginning of the financial year. If the financial year starts