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Describe Shut down Problems while giving illustrations

Describe Shut down Problems while giving illustrations

Answers

These problems involve decisions about:
(1) Whether or not to close down a factory, a department, a product line either because it is making losses or it is too expensive to manage.
(2) If the decision is to shutdown, whether the closure should be permanent or temporary.

In practice shutdown problems involve long term considerations of capital expenditure and revenue. It is possible however to simplify these decisions into short term decisions either by assuming that:
1. Fixed Asset sales and redundancy costs would be negligible.
2. Income from fixed asset sales would match the redundancy costs i.e will cancel (offset)

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Titany answered the question on October 12, 2021 at 06:01

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