Allegiance, Inc. has $129,000 of inventory that suffered minor smoke damage from

Question

Allegiance, Inc. has $129,000 of inventory that suffered minor smoke damage from a fire in the warehouse. The company can sell the goods "as is" for $46,000; alternatively, the goods can be cleaned and shipped to the firm's outlet center at a cost of $27,000. There the goods could be sold for $84,000. What alternative is more desirable and what is the relevant cost for that alternative?

Allegiance, Inc. has $129,000 of inventory that suffered minor smoke damage from a fire in the warehouse. The company can sell the goods "as is" for $46,000; alternatively, the goods can be cleaned and shipped to the firm's outlet center at a cost of $27,000. There the goods could be sold for $84,000. What alternative is more desirable and what is the relevant cost for that alternative?

Explanation / Answer

Clean and ship to outlet center, $156,000.

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