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Sunland Company has old inventory on hand that cost $30750. Its scrap value is $41000. The...

Sunland Company has old inventory on hand that cost $30750. Its scrap value is $41000. The inventory could be sold for $102500 if manufactured further at an additional cost of $30750. What should Sunland do?

A.Sell the inventory for $41000 scrap value

B.Dispose of the inventory to avoid any further decline in value

C.Hold the inventory at its $30750cost

D. Manufacture further and sell it for $102500

Expert Solution

Answer isD. Manufacture further and sell it for $102,500

Explanation:

Option1: Sell the inventory at scrap value:

Profit in such casse will be:

Sales amount: $41,000

Less: Cost of INventory: $30,750

Profit $10,250

Option-2: Process further and sell.

Profit will be:

Sales value: $102,500

LEss: Further processing cost: $30750

Less: Cost of Inventory: $30,750

Profit on Inventory: $41,000

Hence Option of further manufacture and then sold shall be taken.

ekkarill92 answered 1 year ago

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