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Shutdown decision

A shutdown or discontinuance decision compares the contribution lost with costs genuinely saved and other changed consequences. A segment showing an accounting loss after common-cost allocation can still support overall profit. Include closure, redundancy, contract, customer and restart effects where relevant. Distinguish a temporary suspension from permanent exit and consider how the action affects related products, capacity and long-term strategy.

Worked example

A product earns $50,000 contribution but is charged $30,000 avoidable fixed cost and $40,000 unchanged common allocation. Dropping it reduces total profit by $20,000 before other effects.

Common mistake

A reported segment loss is not proof that closure improves the organisation’s profit.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA PM Direct September 2026–June 2027