Final answer:
The factor 'unavoidable fixed costs related to the product' is not relevant when deciding whether to discontinue a product because these are sunk costs that must be paid regardless of production decisions. Important considerations include contribution margin, avoidable fixed costs, and impact on sales of other products.
Step-by-step explanation:
When deciding whether or not to discontinue a product, certain financial factors are essential to consider. Among the factors mentioned, c. unavoidable fixed costs related to the product is not relevant because these costs will be incurred regardless of the decision to continue or discontinue the product.
Fixed costs are often sunk costs that cannot be recouped; therefore, they do not directly impact the marginal benefit of continuing production of a specific product.
However, one has to consider factors like a. the products contribution margin, b. avoidable fixed costs related to the product, and d. the effect of discontinuation on the sales of the company's other products because these convey information about a firm's ability to cut costs and the extent to which eliminating a product might affect overall profitability.
The Shutdown Point is the scenario where a firm must decide whether to continue production or shut down temporarily, especially when facing losses.
A temporary shutdown may reduce variable costs to zero, but fixed costs accrued during the shutdown period still need to be paid.
The decision to continue producing depends on whether the product's revenue can cover the variable costs and contribute to fixed costs while leaving scope for potential profitability.