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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.
Your company is considering investing in its own transport fleet. The presentposition is that carriage is contracted to an outside organization. The life of thetransport fleet woul
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find full-cost& variable cost using transfer pricing method
accounting process or accounting cycle
Characteristics of irrelevant costs
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briefly discuss five characteristics of relevant cost
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