Page 27 - Manac Costing Test 2 class slides - 2. Decision Making
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DECISION MAKING
Discontinuation Decisions - Example
John started his business 5 years ago, but Division A has been struggling for
the past 2 years due to intense market competition from other leading brands.
The results of Division A for the year ending 31 March 2013 were as follows:
Sales R400 000
Direct material (R250 000)
Depreciation (R50 000)
Salaries and wages (R170 000)
(R70 000)
If Division A is shut down the entire workforce will be retrenched at a cost of
R60 000.
Determine whether Division A should be shut down or not.
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