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Hello Sir, hope you are doing well.
Sir my Question Relates to Stay Clean Company (December 2009 Attempt).
Sir i have watched all your video related to short term decision making. However i felt completely blank w.r.t Req A.
After reading this question i was unable to decide how to start. Because sir it asks to decide whether it’s worthwhile ceasing to produce the T.D now rather than waiting for 12 months.
So initially what i thought was that maybe we need to calculate the relevant Cost of cessation of TD immediately and Relevant Cost of cessation of TD after 12 months time and then to make a decision based upon whichever option gives the Lowest Cost.
However the way answer has been provided in the Exam kit is different. Can you please help me out as to how we decided that final decision will be just based upon the Relevant Cost of Cessation Of TD immediately.
Being more specific what was the right approach to deal this question. Sir I’m not asking the question to be solved by you i do not have doubt in any working of the question as such, rather i couldn’t understood how to start the question and what is it based upon which the ultimate decision needs to be taken
Calculate whether or not it is worthwhile ceasing to produce the TD now rather than waiting 12 months.
So, it is asking to look at the benefits of ceasing it now.
When you have calculated the effect of lost revenue, the effect of lost contribution from other products any cost saved etc …..you end up with a negative figure which tells you it’s not worthwhile ceasing to produce TD now.
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