Question
1.A corporation has been experiencing a slowdown in business activities in August and September and is considering temporarily shutting down its operations during those months.
1.A corporation has been experiencing a slowdown in business activities in August and September and is considering temporarily shutting down its operations during those months. The accounting department hasprovided the following normal operating data for consideration: unit sales price, P 150; unit variable production cost, P 60; unit variable marketing cost, P10; monthly fixed overhead, P 500,000, monthly fixed expenses, P200,000; regular sales in units, 10,000 per month; estimated sales in units in August and September, 5,000 per month.If the company shuts down its operations, the following costs are expected to be incurred: security and safety, P 200,000 per month; restart-up costs, P 100,000 per set-up, regular fixed overhead, 40% of total will remain; regular fixed expenses, reduced by 30%.Required: Compute the total shutdown costs, shutdown point in two months, and the advisable alternative(continuing or discontinuing the operations) with its advantage amount.
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