Vaughn, Inc. has 9700 obsolete calculators, which are carried in inventory at a cost of $19900. If the calculators are scrapped, they can be sold for $1.20 each (for parts). If they are repackaged, at a cost of $14300, they could be sold to toy stores for $2.50 per unit. What alternative should be chosen, and why? Repackage; revenue is $5600 greater than cost Scrap; operating income is $1690 greater Scrap; incremental loss is $8260 Repackage; receive operating income of $9950
Vaughn, Inc. has 9700 obsolete calculators, which are carried in inventory at a cost of $19900. If the calculators are scrapped, they can be sold for $1.20 each (for parts). If they are repackaged, at a cost of $14300, they could be sold to toy stores for $2.50 per unit. What alternative should be chosen, and why? Repackage; revenue is $5600 greater than cost Scrap; operating income is $1690 greater Scrap; incremental loss is $8260 Repackage; receive operating income of $9950
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vaughn, Inc. has 9700 obsolete calculators, which are carried in inventory at a cost of $19900. If the calculators are scrapped, they can be sold for $1.20 each (for parts). If they are repackaged, at a cost of $14300, they could be sold to toy stores for $2.50 per unit. What alternative should be chosen, and why?
Repackage; revenue is $5600 greater than cost
Scrap; operating income is $1690 greater
Scrap; incremental loss is $8260
Repackage; receive operating income of $9950
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