Varto Company has 12,200 units of its product in inventory that it produced last year at a cost of $152,000. This year's model is better than last year's, and the 12,200 units cannot be sold at last year's normal selling price of $37 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $170,800 or (2) they can be processed further at an additional cost of $238,400 and then sold for $402,600. (a) Prepare a sell as is or process further analysis of income effects. (b) Should Varto sell the products as is or process further and then sell them?
Varto Company has 12,200 units of its product in inventory that it produced last year at a cost of $152,000. This year's model is better than last year's, and the 12,200 units cannot be sold at last year's normal selling price of $37 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $170,800 or (2) they can be processed further at an additional cost of $238,400 and then sold for $402,600. (a) Prepare a sell as is or process further analysis of income effects. (b) Should Varto sell the products as is or process further and then sell them?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Varto Company has 12,200 units of its product in inventory that it produced last year
at a cost of $152,000. This year's model is better than last year's, and the 12,200 units
cannot be sold at last year's normal selling price of $37 each. Varto has two
alternatives for these units: (1) They can be sold as is to a wholesaler for $170,800 or
(2) they can be processed further at an additional cost of $238,400 and then sold for
$402,600.
(a) Prepare a sell as is or process further analysis of income effects.
(b) Should Varto sell the products as is or process further and then sell them?
(a) Sell or Process Analysis
Revenue
Costs
Income
Incremental income (loss) to sell as is
(b) The company should
Sell As Is
Process Further
4
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