A) if the selling price per unit exceeds the vairable cost per unit - this is a viable reason to keep operating as some of the excess reduces the effect of fixed costs on the bottom line.
b) to help the local economy -
this is unsustainable unless continued operations are meant to keep the
local economy going in order to attract other investments. Long term
this is going to reduce ROE.
c) In an effort to cover at least some of the variable cost -
poor reason to continue. If only part of the variable costs are covered
then each unit produced increases the overall costs and decreases
overall profit of the company.
d)unless variable costs are zero when production is zero -
not enough information to evaluate this option, as this may be true as
well as option a, or it may be that this is true but a certain
threshhold must be met beyond which the plant is profitable. More
information would be necessary to make this analysis. Are sales
depressed beyond the point of any profit? If so, then in this instance
operations should cease, even if only temporarily.
May 3rd, 2014
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