**Inventory Management Decision-Making Exercise** Bramble Corp. has inventory on hand with a cost of $24,000. Its scrap value is $38,000. The inventory could be sold for $76,000 if processed further at an additional cost of $21,000. What should Bramble do?- **Option 1:** Manufacture further and sell it for $76,000.- **Option 2:** Sell the inventory for $38,000 scrap value.- **Option 3:** Dispose of the inventory to avoid any further decline in value.- **Option 4:** Hold the inventory at its $24,000 cost.**Analysis of Options:**1. **Manufacture Further:** - Additional Processing Cost: $21,000 - Potential Sales Revenue after Processing: $76,000 - Net Income from Manufacturing Further: $76,000 (sales) - $21,000 (additional cost) - $24,000 (initial cost) = $31,0002. **Sell as Scrap:** - Scrap Value: $38,000 - Net Income from Selling as Scrap: $38,000 - $24,000 (initial cost) = $14,0003. **Disposing of Inventory:** - This option typically implies no revenue and possibly additional costs related to disposal. Therefore, not a favorable choice unless there is a significant decline in value expected.4. **Holding Inventory:** - This option involves retaining the asset at its initial cost, with no immediate income or additional outlay, but with potential future costs or depreciation.**Recommendation:**Based on the analysis, manufacturing the inventory further and selling it for $76,000 yields the highest net income of $31,000. Therefore, the recommended option for Bramble Corp. would be to manufacture further and sell the inventory for $76,000.

Incremental Analysis :— This analysis shows the comparison between two different alternatives.…

Bramble Corp. has inventory on hand with a cost of $24000. Its scrap value is $38000. The inventory could be sold for $76000 if processed further at an additional cost of $21000. What should Bramble do? O Manufacture further and sell it for $76000. O Sell the inventory for $38000 scrap value. O Dispose of the inventory to avoid any further decline in value. O Hold the inventory at its $24000 cost.

Bramble Corp. has inventory on hand with a cost of $24000. Its scrap value is $38000. The inventory could be sold for $76000 if processed further at an additional cost of $21000. What should Bramble do? O Manufacture further and sell it for $76000. O Sell the inventory for $38000 scrap value. O Dispose of the inventory to avoid any further decline in value. O Hold the inventory at its $24000 cost.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 1MC: Sienna Company uses the FIFO cost flow assumption. Sierra has inventory with a selling price of 100,...

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