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Chapter 6

10.2 Non-quantifiable cost or benefit of closure

Some of the costs and benefits discussed above may be non-quantifiable at the
point of making the shut-down decision:

 Penalties and other costs resulting from the closure (e.g. redundancy,
compensation to customers) may not be known with certainty reorganisation
costs may not be known with certainty – additional contribution from the
alternative use for resources released may not be known with certainty.

 Knock-on impact of the shut-down decision. For example, supermarkets
often stock some goods which they sell at a loss. This is to get customers
through the door, who they then hope will purchase other products which
have higher profit margins for them. If the decision is taken to stop selling
these products, then the customers may no longer come to the store.

Illustrations and further practice

Now try TYU 5 ‘Fiona Co’.

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