Waltherboro Company recently discontinued the manufacture of product J15. The standard costs for this product were: $\begin{array}{lr}
\text { Direct material } & \$ 50 \
\text { Direct labor } & 20 \
\text { Variable overhead } & 14 \
\text { Fixed overhead } & 35\
\text { Total }&\$119
\end{array}$
There are 800 units of this product in finished-goods inventory. The units are technologically obsolete, and the following alternatives are being considered:
1. Dispose of as scrap. The proceeds from the sale will equal the cost of transportation to the disposal site.
2. Sell to an exporter for sale in a developing country. The sales price to the exporter would be $12 per unit.
3. Remanufacture the products to convert them into model J16, a model that normally sells for $200. The additional cost to convert the J15 units would be $45; the standard cost to manufacture J16 is $125. Presently, there is sufficient capacity to manufacture product J16 directly or to do the necessary conversion work on J15.
Required:
A. Determine the current carrying value of the J15 inventory.
B. Evaluate each alternative and determine the financial benefit to Waltherboro if the alternative is pursued.

Question

Waltherboro Company recently discontinued the manufacture of product J15. The standard costs for this product were: $\begin{array}{lr}
\text { Direct material } & \$ 50 \
\text { Direct labor } & 20 \
\text { Variable overhead } & 14 \
\text { Fixed overhead } & 35\
\text { Total }&\$119
\end{array}$ 
There are 800 units of this product in finished-goods inventory. The units are technologically obsolete, and the following alternatives are being considered:
1. Dispose of as scrap. The proceeds from the sale will equal the cost of transportation to the disposal site.
2. Sell to an exporter for sale in a developing country. The sales price to the exporter would be $12 per unit.
3. Remanufacture the products to convert them into model J16, a model that normally sells for $200. The additional cost to convert the J15 units would be $45; the standard cost to manufacture J16 is $125. Presently, there is sufficient capacity to manufacture product J16 directly or to do the necessary conversion work on J15.
Required: 
A. Determine the current carrying value of the J15 inventory.
B. Evaluate each alternative and determine the financial benefit to Waltherboro if the alternative is pursued.

Quizplus · Accepted Answer

The Answer of Waltherboro Company recently discontinued the manufacture of product J15. The standard costs for this product were: $\begin{array}{lr}
\text { Direct material } & \$ 50 \
\text { Direct labor } & 20 \
\text { Variable overhead } & 14 \
\text { Fixed overhead } & 35\
\text { Total }&\$119
\end{array}$ 
There are 800 units of this product in finished-goods inventory. The units are technologically obsolete, and the following alternatives are being considered:
1. Dispose of as scrap. The proceeds from the sale will equal the cost of transportation to the disposal site.
2. Sell to an exporter for sale in a developing country. The sales price to the exporter would be $12 per unit.
3. Remanufacture the products to convert them into model J16, a model that normally sells for $200. The additional cost to convert the J15 units would be $45; the standard cost to manufacture J16 is $125. Presently, there is sufficient capacity to manufacture product J16 directly or to do the necessary conversion work on J15.
Required: 
A. Determine the current carrying value of the J15 inventory.
B. Evaluate each alternative and determine the financial benefit to Waltherboro if the alternative is pursued.

Waltherboro Company Recently Discontinued the Manufacture of Product J15 There Are 800 Units of This Product in Finished-Goods Inventory