Graham Company has 15,000 units in inventory that had a production cost of $3 per unit.These units cannot be sold through normal channels due to a significant technology change.These units could be reworked at a total cost of $23,000 and sold for $28,000.Another alternative is to sell the units to a junk dealer for $8,500.The relevant cost for Graham to consider in making its decision is
A)$45,000 of original product costs.
B)$23,000 for reworking the units.
C)$68,000 for reworking the units.
D)$28,000 for selling the units to the junk dealer.

Question

Quizplus · Accepted Answer

The relevant cost for Graham to consider is the cost of reworking the units ($23,000) vs. the cost of selling them to the junk dealer ($8,500). The original production cost and potential sales revenue are not relevant since the units cannot be sold through normal channels due to a technology change. Therefore, it is more financially advantageous for Graham Company to rework the units and sell them for $28,000 rather than sell them to the junk dealer for $8,500.

Graham Company Has 15,000 Units in Inventory That Had a Production