on 4 A distributor of electric pumps must decide what to do with a \"lot\" of ol
ID: 2808448 • Letter: O
Question
on 4 A distributor of electric pumps must decide what to do with a "lot" of old electric pumps purchased 3 years ago. Soon after the distributor purchased the lot, technology advances made the old pumps less desirable to customers. The pumps are becoming obsolescent as they sit in inventory. The pricing manager has the red d out of following information. Distributors purchase price 3 years ago: $6584 ag ion Distributor's storage costs to date: $1147 Distributor's list price 3 years ago: $9586 Current list price of the same number of new pumps: $11147 Amount offered for the old pumps from a buyer 2 years ago: $4855 Current price the lot of old pumps would bring: $3375 Looking at the data, the pricing manager has concluded that the price should be set at $7731. This is the money that the firm has "tied up" in the lot of old pumps (purchase+storage), and it was reasoned that the company should at least recover this cost. Furthermore, the pricing manager has argued that an $7731 price would be $1855 less than the list price from 3 years ago, and it would be $3416 less than what a lot of new pumps would cost. What would be your advice on price? (Write the amount of adviced price, without unit Answer type: xx no decimalst Answer:Explanation / Answer
obsolescence inventory are lot of products which are not of any use , it means the price of such inventories reduces with time . Company should rid of from the stock as soon as possible , as cost of storage increase with increase of time . In general practice of accounting such inventory will almost always have a value that is less than cost.
So as per understanding of concept and importance of getting rid of obsolescence inventory, the advice price should be equal to market price.
Advice price : $3375
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