Page 55 - Unisa Test 4 Manac Slides
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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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