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Question - A US company has revenue of $5.5 million and total costs of $7.5 million, which are or can be broken down into total fixed cost of $3 million and total variable cost of $4.5 million. The net loss on the firm's income statement is reported as $2,000,000 (ignoring tax implications). In prior periods, the firm had reported profits on its operations.
What decision should the firm make regarding operations over the short term?
What decision should the firm make regarding operations over the long term?
Assume the same business scenario except that revenue is now $5.0 million, and total costs of $7.5 million, which are or can be broken down into total fixed cost of $3 million and total variable cost of $4.5 million, which creates a net loss of $1.2 million. What decision should the firm make regarding operations in this case?
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