Suppose your company has just discovered $90,000 worth (this is the original manufacturing cost) of obsolete inventory in an old warehouse. Your boss asks you to evaluate two options: (1) remachine the obsolete parts at a cost of $29,000 and then hopefully resell them for $62,000 or (2) scrap them for $14,500 cash (which is certain) through a secondhand market. What recommendation would you make to your boss?
Suppose your company has just discovered $90,000 worth (this is the original manufacturing cost) of obsolete inventory in an old warehouse. Your boss asks you to evaluate two options: (1) remachine the obsolete parts at a cost of $29,000 and then hopefully resell them for $62,000 or (2) scrap them for $14,500 cash (which is certain) through a secondhand market. What recommendation would you make to your boss?
Introductory Circuit Analysis (13th Edition)
13th Edition
ISBN:9780133923605
Author:Robert L. Boylestad
Publisher:Robert L. Boylestad
Chapter1: Introduction
Section: Chapter Questions
Problem 1P: Visit your local library (at school or home) and describe the extent to which it provides literature...
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Suppose your company has just discovered $90,000 worth (this is the original manufacturing cost) of obsolete inventory in an old warehouse. Your boss asks you to evaluate two options: (1) remachine the obsolete parts at a cost of $29,000 and then hopefully resell them for $62,000 or (2) scrap them for $14,500 cash (which is certain) through a secondhand market. What recommendation would you make to your boss?
Transcribed Image Text:Suppose your company has just discovered $90,000 worth (this is the original manufacturing cost) of obsolete inventory in an old warehouse. Your boss asks you to evaluate two options: (1) remachine the obsolete parts at a
cost of $29,000 and then hopefully resell them for $62,000 or (2) scrap them for $14,500 cash (which is certain) through a secondhand market. What recommendation would you make to your boss?
Select all that apply.
O A. Choose option (1), even if the remachined parts can be surely sold for at least $43,501.
O B. Choose option (1), if the value of remachining is reasonably certain.
O C. Choose option (2), if management is highly risk-averse.
O D. Choose option (2), if management is risk-neutral.
O E. Choose option (1), even if the remachined parts can be surely sold for at least $14,501.
Click to select your answer(s).
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