Hello everyone!
I know it has been said in the case that cat lavatories are sold basically at production cost, but somehow this does not seem right to me.
Sales of cat lavatories account for 70M€ in Y3 and gross margin is 0%, leaving no doubts that total costs are 70M€.
The production and labour costs are 5M€ though, which leaves 65M€ to be allocated on other types of costs... am I doing a thinking error here?
If not, would it not be worthy to analyse what these other costs are before shutting the production line down (which would actually generate additional costs)?
Thank you!
(edited)
Thank you for your answer, Clara. I must say I am still skeptical about the conclusions, because 0% profit is anyway not a loss, and you might want to do further analysis and consider other factors (e.g.: Brand Awareness) before suggesting to shut the production down. But many thanks for your advice, it definitely helps!