Namov Company has old inventory on hand that cost $12,000.Its scrap value is $16,000.The inventory could be sold for $38,000 if manufactured further at an additional cost of $12,000.What should Namov do?
A)Sell the inventory for $16,000 scrap value.
B)Dispose of the inventory to avoid any further decline in value.
C)Hold the inventory at its $12,000 cost.
D)Manufacture further and sell it for $38,000.

Question

Quizplus · Accepted Answer

Manufacturing the inventory further and selling it for $38,000 would result in a net profit of $14,000 ($38,000 - $12,000 - $12,000), which is more than the current scrap value of $16,000. Therefore, it is the best choice for Namov Company.

Namov Company Has Old Inventory on Hand That Cost $12,000