Solved: Please select two of the following scenarios and answer the question in each. Be sure

1. A diversified food company is considering the closing of its condiment division. What two to three qualitative factors should be considered before discontinuing a division or product line?

Answer: Before deciding to discontiue a division or a product line the following two qualitative factors should be kept in mind. These are-

1. Contribution margin- Contribution margin is product’s price minus all the variable costs that are associated in the production. If the contribution margin is high, increasing the sale of the product will reduce loss. So if the product or the divison has a postivie contribution margin, we should not discontinue the product line or the division.

2. Fixed cost: Even after discontinuing the division or the product line if some fixed are unavoidable such as depriciation or some govenment obligations, it will not be wise enough to contiue the dision or the product line cause discontinuation will only incur losses as it will not be contributing to the overall contribution margin.

What two to three qualitative factors might you consider when determining whether or not to replace your car?

Answer-

The factors which should be kept in mind before replacing a car are-

1. maintanance cost- If the maintance cost every month is more than what the monthly payment of the car would be, you should replace your car.

2. Gas mileage :It will be a better decision to go for a fuel effiecient car as it will save lot of money on gas costs.