Why, Cost is not the only criteria for deciding in favour of shut down ?

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Why, Cost is not the only criteria for deciding in favour of shut down ?

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Rakesh Sahu asked over 5 years ago

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acharya · Answer 1 · 2016-01-31 14:01:24 UTC

The concept is that if a firm can produce revenue greater or equal to its total variable costs, it can use the additional revenue to pay down its fixed costs. This assumes that fixed costs will still be incurred when a firm shuts down, such as lease contracts or other lengthy obligations. In other words, when a firm can earn a positive contribution margin

narahari · Answer 2 · 2015-11-21 10:31:49 UTC

Interest of workers, if the workers are discharged. It may become difficult to get skilled workers later, on reopening of the factory. Also shut-down may create problems. In the face of competition it may be difficult to re-establish the market for the product.

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