Managerial Economics

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At a recent board meeting, the president and CEO got into a heated argument about whether to shut down the firm's plant in Miami. The Miami plant should continue to operate, at least until a buyer is for the production facility. The president's argument was based on the fact that the Miami plant's fixed costs are $68,000 per month. The CEO exploded over this point, castigating the president for considering fixed costs in making the shutdown decision. According to the CEO, "Everyone knows fixed costs don't matter!"

  • Managerial Economics -

    Do fixed costs matter?

    Is the plant in Miami still making and selling products to offset the fixed costs?

    Which side are you on?

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