Janssen Company has old inventory on hand that cost $18,000. Its scrap value is $24,000. The inventory could be sold for $60,000 if manufactured further at an additional cost of $18,000. What should Janssen do?
A) Sell the inventory for $24,000 scrap value
B) Dispose of the inventory to avoid any further decline in value
C) Hold the inventory at its $18,000 cost
D) Manufacture further and sell it for $60,000.

Question

Quizplus · Accepted Answer

Manufacturing the inventory further and selling it for $60,000 provides a higher return on investment than selling it for scrap value or holding it at its current cost. The additional cost of $18,000 for manufacturing is a reasonable investment as the return is higher. Disposing of the inventory would result in a loss and is therefore not a good option.

Janssen Company Has Old Inventory on Hand That Cost $18,000