Carson Company's market for the Model A has changed significantly,and Carson has had to drop the price per unit from $265 to $125.There are some units in the work in process inventory that have costs of $150 per unit associated with them.Carson could sell these units in their current state for $100 each.It will cost Carson $10 per unit to complete these units so that they can be sold for $125 each.
When the incremental revenues and expenses are analyzed,the company is better off by:
A)$25 per unit if they sell the units in their current state.
B)$15 per unit if they complete the units.
C)$10 per unit if the sell the units in their current state.
D)$125 per unit if they complete the units.

Question

Quizplus · Accepted Answer

If Carson sells the units in their current state, they will earn $100 per unit but will have to forgo the opportunity to earn $125 per unit by completing them. If they complete the units, it will cost them $10 per unit and they can sell them for $125 each, leaving a profit of $15 per unit ($125 selling price - $150 cost to complete). Therefore, completing the units is the better choice and will result in a profit of $15 per unit.

Carson Company's Market for the Model a Has Changed Significantly,and