1. Cost reductions can not be considered as profit increases as usually they entail revenue reductions as well. In your example, you would simply decrease your costs by 6K, but apparently also decrease your revenue by 7.5K, hence loose 1.5K profit.

2. It makes sense to shut down a profitable product when it cannibanilzes other profit sources or when it binds resources that you could use otherwise to increase profit with a different product.

Hi, hope this might help.

Always remember that PROFIT = REVENUES - COSTS. Therefore, I wouldn't say that cost saving is considered a profit, but that: "IF THE REDUCTION IN COSTS IS GREATER THAN THE ONE IN REVENUES (considering this scenario in which we are shutting down a product line), THEREBY THE COMPANY WILL INCREASE ITS PROFITS".

Regarding the second question, another idea is shutting down a profitable product because it is cannibalizing others with higher profit margins.