Production of a particular production

Reference no: EM13786584

Company A is considering when to stop production of a particular production of a particular product in its product line. Capital equipment used to manufacture the product is specialized but can readily be sold as used equipment. If the decision rule for this case says "keep producing the product as long as the contribution to net earnings is positive", what if anything is wrong with that? Contribution to new earnings where t= the tax rate, (1-t) (sales-variance cost-depreciation used to manufacture product. Suggested solution guide Think about that depreciation shield some income from tax, this shield must be taken into account in the contribution equation.

Reference no: EM13786584

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