The Criders Company has 12,000 units of obsolete inventory.The units originally cost $6,000.The company can either sell them for scrap at $.20 per unit or they can invest $2,000 to be able to sell them at a price of $.60 per unit.With regard to this decision, relevant costs or benefits include:
A)$6,000 only.
B)$2,000 and $.20 per unit only.
C)$.20 per unit, $.60 per unit, and $2,000.
D)$2,000 and $6,000 only.

Question

Quizplus · Accepted Answer

The relevant costs are the revenue generated from selling at $.60 per unit ($.60 x 12,000 = $7,200) and the cost to invest in order to sell at that price ($2,000). The revenue generated from selling for scrap ($.20 x 12,000 = $2,400) is also relevant. Therefore, choice C is the best answer as it includes all three relevant costs.

The Criders Company Has 12,000 Units of Obsolete Inventory