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
What is Standard costing Standard cost is a predetermined cost. It is a determination in advance of production of what should be the cost. When standard costs are used for the

Queuing problems There are two main approaches to queuing problems: •    simulation •    queuing theory formula Where simple situations apply, queuing theory should be used

solutions for (POS) slow printing of sales tickets and unpredictable action of cash drawers. when credit approvals delayed the checkout process or when the computer was down, thus

Comparing real and planned outcomes and responding to Divergences from Plan The final phases in the process outlined in figure shown below of comparing real and planned outcome

Explain the Cost accounting:         Meaning and definition: Cost accounting is the process of accounting for cost which begins with the incurrence of cost and ends with th

How much to order Supposing the estimated annual usage of a component by Machinery Ltd is 20,000 units.  Usage is even throughout the year and only one order per annum is place

Carrying costs of inventory These are costs incurred because the firm has decided to maintain inventories. They generally consist of: •    Stock-out costs •    Insurance co

Strategic Positioning The company must identify its strategic choices. This can be done from the firm’s objectives, which emanates from the firms mission. Strategies have to be


Transfer pricing sometimes entails using different transfer pricing systems: one for tax purposes, and one for internal decision making, even though maintaining two systems can be