In a cost reduction case, a suggestion to reduce costs was to stop manufacturing a specific product. The cost would be lowered by $6000/year, but this specific product segment is still profitable (profit of $1500/year). Saving $6,000/year in costs and suffering a maximum reduction of $1,500/year in profits is deemed to be a net gain of $4,500/year, and therefore a good option.
1. Can cost saving be considered as "profit" ?
2. When does it make sense to shut down a profitable product ? My first assumption is that is does when we know we could use the cost saving to develop a more profitable product.
Any insights on that?