Factory shutdown costs

Case Interview
New answer on Mar 22, 2021
5 Answers
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Anonymous A asked on Mar 21, 2021

Hello, what are the costs of a plant/factory shutdown?

I identified the following:

Sunk costs

Penalties (for instance paying fees for suppliers)

Lay-offs costs

(edited)

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Adi
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replied on Mar 21, 2021
Accenture, Deloitte | Precision Case Prep | Experienced Interviewer & Career Coach | 15 years professional experience

Yes, I agree with your list. Cost must also include cost of disposing/recycling/ equipment and any other admin fee (legal, environmentatl).

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Clara
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replied on Mar 22, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

I would not consider sunk costs at this point tbh -they are precisely sunk-.

Over that, all the admin cost of selling/removing the building, and the taxes paid on the sale if so

Hope it helps!

Cheers,

Clara

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Henning
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replied on Mar 21, 2021
Bain | passed >15 MBB interviews as a candidate

I'd add opportunity costs - revenue that you're ceasing if you're closing the factory.

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Ian
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replied on Mar 21, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

Agreed with your list and Adi's addition.

That said, I wouldn't put sunk costs here (by their definition, they are sunk).

Finally, I would add the biggest cost of them all: opportunity cost. I.e. lost revenues.

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Gaurav
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replied on Mar 22, 2021
Ex-Mckinsey|Certified Career Coach |Placed 500+ candidates at MBB & other consultancies

Agree with the colleagues' additions! Opportunity cost may be crucial here.

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Adi gave the best answer

Adi

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Accenture, Deloitte | Precision Case Prep | Experienced Interviewer & Career Coach | 15 years professional experience
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