Renee Company has old inventory on hand that cost $12000. Its scrap value is $16000. The inventory could be sold for $40000 if manufactured further at an additional cost of $12000. What should Renee do?

Question

Quizplus · Accepted Answer

Manufacturing the inventory further and selling it for $40000 would result in a net benefit of $16000 ($40000 sales price - $12000 additional cost). This is greater than the scrap value of $16000 and the cost of $12000 to dispose of it, and also better than holding the inventory at its $12000 cost. Therefore, manufacturing further and selling the inventory is the best choice.

Renee Company Has Old Inventory on Hand That Cost $12000