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1. An employee of Meagan Corporation found some partially completed units of Model X in a dusty corner of the warehouse.  A job ticket attached to the units indicates that a total of P750 in manufacturing costs have been used to bring the materials to this point in the manufacturing process.  The units can be sold in their current condition for P275 to a scrap metal dealer.  If Meagan spends P250 to complete the units, they could be sold for P600.   a. What should Meagan do? Why? b. Identify the sunk cost, if any.

1. An employee of Meagan Corporation found some partially completed units of Model X in a dusty corner of the warehouse.  A job ticket attached to the units indicates that a total of P750 in manufacturing costs have been used to bring the materials to this point in the manufacturing process.  The units can be sold in their current condition for P275 to a scrap metal dealer.  If Meagan spends P250 to complete the units, they could be sold for P600.   a. What should Meagan do? Why? b. Identify the sunk cost, if any.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. An employee of Meagan Corporation found some partially completed units of Model X in a dusty corner of the warehouse.  A job ticket attached to the units indicates that a total of P750 in manufacturing costs have been used to bring the materials to this point in the manufacturing process.  The units can be sold in their current condition for P275 to a scrap metal dealer.  If Meagan spends P250 to complete the units, they could be sold for P600.  

a. What should Meagan do? Why?

b. Identify the sunk cost, if any.

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