|
How do we terminate a product line? |
|
If you sell all of the capacity on a production line, Foundation® interprets this as a liquidation instruction. If you have 900,000 units of First Shift Capacity (900 on the spreadsheet) enter -900. Foundation® will sell capacity at 65% of the original value, and your remaining inventory for half the average cost of production (that is, labor + material costs). Foundation® writes off the loss on your Income Statement.
Tip: If you want to terminate your product line, but still sell left over inventory at full price, keep one unit of capacity. For example, if your First Shift Capacity is 900, enter -899. The capacity sale will convert almost all of the production line into cash, but your inventory will remain available for sale.
The Production spreadsheet reports the selling price of the capacity at 65% of the original value. It does not, however, compute write-offs for you. If you sell very old capacity, you will make a capital gain on the sale of equipment. If you sell new capacity, you will take a loss on transaction. These will be reported on your Annual Report, but they are beyond the capabilities of your Proformas.
|
