Question

Crane Company has old inventory on hand that cost $7500. Its scrap value is $10000. The inventory could be sold for $25000 if manufactured further at an additional cost of $7500. What should Crane do

Answer 1

If the company reworks the units, income will increase by $7,500

Step-by-step explanation:

Giving the following information:

The initial cost should not be taken into account.

Sell as-is:

Selling price= $10,000

Rework:

Additional cost= $7,500

Selling price= $25,000

We need to determine which option is most profitable.

Sell as-is:

Effect on income= $10,000

Rework:

Effect on income= 25,000 - 7,500= $17,500

If the company reworks the units, income will increase by $7,500