Paul Company is contemplating to close the operations of the club Due to heavy rains brought by La Niña, the expected demand of the club was reduced, which is expected to last for six (6) months. Assume the typical monthly operating revenues and costs of the club operations of Paul Company: Selling price per membership P400 Variable costs per membership 270 Contribution margin 130 Fixed costs per month P150,000 Fixed costs avoided if stop operations 70,000 Additional costs during the shutdown period for six (6) months 40,000 Estimated restarting costs 100,000 If it continues operating, the company will be forced to reduce the membership selling price by 12.50%. Determine the shutdown Determine the shutdown Determine the shutdown If the demand of the club is 3,600 memberships, should the company shut down or continue operations? Justify your answer.
Paul Company is contemplating to close the operations of the club Due to heavy rains brought by La Niña, the expected demand of the club was reduced, which is expected to last for six (6) months. Assume the typical monthly operating revenues and costs of the club operations of Paul Company: Selling price per membership P400 Variable costs per membership 270 Contribution margin 130 Fixed costs per month P150,000 Fixed costs avoided if stop operations 70,000 Additional costs during the shutdown period for six (6) months 40,000 Estimated restarting costs 100,000 If it continues operating, the company will be forced to reduce the membership selling price by 12.50%. Determine the shutdown Determine the shutdown Determine the shutdown If the demand of the club is 3,600 memberships, should the company shut down or continue operations? Justify your answer.
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- Paul Company is contemplating to close the operations of the club Due to heavy rains brought by La Niña, the expected demand of the club was reduced, which is expected to last for six (6) months. Assume the typical monthly operating revenues and costs of the club operations of Paul Company:
|
Selling price per membership |
P400 |
|
Variable costs per membership |
270 |
|
Contribution margin |
130 |
|
Fixed costs per month |
P150,000 |
|
Fixed costs avoided if stop operations |
70,000 |
|
Additional costs during the shutdown period for six (6) months |
40,000 |
|
Estimated restarting costs |
100,000 |
If it continues operating, the company will be forced to reduce the membership selling price by 12.50%.
- Determine the shutdown
- Determine the shutdown
- Determine the shutdown
- If the demand of the club is 3,600 memberships, should the company shut down or continue operations? Justify your answer.
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