Varto Company has 7,200 units of its product in inventory that it produced last year at a cost of $154,000. This year’s model is better than last year’s, and the 7,200 units cannot be sold at last year’s normal selling price of $44 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $79,200 or (2) they can be processed further at an additional cost of $150,400 and then sold for $223,200.(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? ### Sell or Process Analysis#### (a) Analysis Table| | Sell As Is | Process Further ||-------------------------|--------------------|--------------------|| **Revenue** | | || **Costs** | | || **Income** | | || **Incremental Income (Loss) to Sell As Is** | | |#### (b) Conclusion- **The company should:** [Decision based on analysis]### ExplanationThis table helps in decision-making about whether a company should sell a product as it is or process it further. The analysis includes comparing revenue, costs, and income for both scenarios. Incremental income/loss indicates the financial effect of choosing to sell as is, compared to processing further. The final recommendation provides guidance based on the computed results.

Incremental income is the difference between the sales revenue of the product and the revenue after…

Answered: Varto Company has 7,200 units of its…

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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Varto Company has 7,200 units of its product in inventory that it produced last year at a cost of $154,000. This year’s model is better than last year’s, and the 7,200 units cannot be sold at last year’s normal selling price of $44 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $79,200 or (2) they can be processed further at an additional cost of $150,400 and then sold for $223,200.

(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?

### Sell or Process Analysis

#### (a) Analysis Table

| | Sell As Is | Process Further |
|-------------------------|--------------------|--------------------|
| **Revenue** | | |
| **Costs** | | |
| **Income** | | |
| **Incremental Income (Loss) to Sell As Is** | | |

#### (b) Conclusion

- **The company should:** [Decision based on analysis]

### Explanation

This table helps in decision-making about whether a company should sell a product as it is or process it further. The analysis includes comparing revenue, costs, and income for both scenarios. Incremental income/loss indicates the financial effect of choosing to sell as is, compared to processing further. The final recommendation provides guidance based on the computed results.

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