A diversified food company is considering the closing of its condiment division. What qualitative factors should...
A diversified food company is considering the closing of its condiment division. What qualitative factors should be considered before discontinuing a division or product line?
Homework Answers
Making loss should not be the only criteria to close a division. The contribution the division makes to cover the existing fixed cost should be considered, which otherwise has to be absorbed by other products
Qualitative factors to be considered before discontinuance
1. Existing market share would be lost and it will be difficult to recapture the same
2. loss of expertise. once shut down the existing workmen would have left the company and difficult to get them all back
3. wear & tear of equipments. Depreciation of machinery is high when closed down than while in operation
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