A Company belonging to the process industry carries out three consecutive processes. The output of the first Process is taken as input of the second process, and the output of the second process is taken as input of the Third process. The final product emerges out of the third process. It is also possible to outsource the intermediate Products. It has been found that over a period of time cost of production of the first process is 10% higher than The market price of the intermediate product, available freely in the market. The company has decided to close Down the first process as a measure of cost saving (vertical spin off) and outsource. Should this event be treated As discontinuing operation?

A Company belonging to the process industry carries out three consecutive processes. The output of the first Process is taken as input of the second process, and the output of the second process is taken as input of the Third process. The final product emerges out of the third process. It is also possible to outsource the intermediate Products. It has been found that over a period of time cost of production of the first process is 10% higher than The market price of the intermediate product, available freely in the market. The company has decided to close Down the first process as a measure of cost saving (vertical spin off) and outsource. Should this event be treated As discontinuing operation?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 14E: Hales Company produces a product that requires two processes. In the first process, a subassembly is...

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