need only correct one

RIP, sacrifice D A B 3,7 Shut-down vs Continue by Sub-Contracting - Profitability Analysis SKANDA LTD has incurred losses during the past five years. Its projection for the coming year is also not very encouraging. The management is seriously considering the closure of the only manufacturing unit. However, it is quite open to getting the Oroducts on a sub-contracting basis and to continue its administrative and marketing functions. Currently, four products are being manufactured and sold by catering to different markets. The management is also willing to any of these products to ensure survival. The projection for the four products for the coming year are given below - Particulars (in Crores) 72.00 54.00 84.00 60.00 Sales 48.00 Costs: Materials 30.00 54.00 36.00 18.00 12,00 30.00 Labour 30.00 Allocated Overheads: 7.20 4.80 6.00 Manufacturing 1.20 3.60 2.40 2.40 Administration and Selling 74.40 48.00 94.80 73.20 Total Cost 6.00 (13.20) Profit /(Loss) (2.40) (10.80) 4.80 The projected volume and sub-contracting charges are - A Particulars B D C Volume (000 nos) 2,000 1,500 3,000 2,000 * 80 Sub Contracting Charges per unit 70 90 * 130 Manufacturing, Administrative and Selling Overheads consists of Staff Salaries, Rent, Essential Maintenance and Tax Payable to Local Authorities. Padhuka s Conc nd 2 case the Management decides to discontinue the manufacturing operations, a minimum notice period of 3 months will be required to be given to the staff as well as to the Landlords of the manufacturing units and offices. You may assume that both the manufacturing as well as the Administrative and Selling Overheads are fixed in nature, and that in the notice period mentioned above, these expenses would continue to be incurred. Also assume that the labour costs are related to the volume of operations and do not involve any notice period for discontinuance and that the costs are incurred and revenues earned evenly in each of the calendar months. 3.8 From the above, advise the management on the best option out of the following under its consideration - 1. Issue notices to the Staff, the Landlords of the manufacturing unit and offices on the first day of the year and discontinue all the operations on that very day. 2. Issue notices as above on the first day of the year and continue the operations till the end of the notice period. (Only profitable products need to be continued). 3. Issue notices to the Staff and the Landlord, only in the manufacturing unit, resort to sub-contracting and to continue the Administrative and Marketing Functions. (Sub-Contracting is needed to be done on profitable products only)