Answer the following questions. 1. A cormpamy has an inventory of 1.,450 assorte

Question

Answer the following questions. 1. A cormpamy has an inventory of 1.,450 assorted parts for a line of missies that has been discontinued. The inventory cost is $74,000. The parts can be ether (a) remachined at total addtional costs of $26,000 and then sold for $30,000 or (b) sold as scrap for $4,500. Which action is more profitable? Show your calculations 2. A truck, costing $102,500 and uninsured, is wrecked its first day in use. It can be ether (a) disposed of for $15,500 cash and replaced with a simlar truck costing $105.000 or (b) rebuilt for $87,000, and thus be brand-new as far as operating characteristics and looks are conoemed. Which action is less costly? Show your calculations 1. A company has an inventory of 1,450 assorted parts for a line of missiles that has been disconsnued. The inventory cost is $74,000. The parts can be either (a) remachined at total additional costs of $26,000 and then soid for $30,000 or (b) sold as scrap for $4,500. Which action is more profitable? Show your caloulations (Only complete the necessary answer boxes) Remachine Scrap Deduct Operating income Action is more profitable 2An?costrg $102 and uninsured. is wrecked its first day i use. tcan be e er a disposed of $15 00 athan aed th unila hak a ings sto erb e test ed he be brand-new as far as operating characteristics and looks are concerned. Which action is less costy? Show your calculations. (Only complete the necessary answer boxes.) Replace Rebuild Deduct: [ Choose from any list or enter any number in the input fields and then continue to the next question

Explanation / Answer

Answer 1. Remachine Scrap Sale       30,000.00        4,500.00 Less: Remachined - Additional Cost    (26,000.00)                     -   Operating Income         4,000.00        4,500.00 Selling as a Scrap is most profitable. Inventory cost is a sunk cost, so it is not relevant here. Answer 2. Replace Rebuild Purchase Cost / Rebuild cost of Truck    105,000.00      87,000.00 Less: Sales of Old Truck as Scrap    (15,500.00)                     -   Net Cost to be Paid       89,500.00      87,000.00 Rebuilding a Truck is less costlier than purchase of New Truck

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