Attleboro Company recently discontinued the manufacture of product J15. The prod

Question

Attleboro Company recently discontinued the manufacture of product J15. The production costs per unit of J15 are as follows: Direct material $ 50 Direct labor 20 Variable overhead 14 Fixed overhead 35 Total $119 There are 800 units of this product in finished-goods inventory. The units are technologically obsolete, and the following alternatives are being considered: I. Sell to an exporter for sale in a foreign country. The sales price to the exporter would be $12 per unit. II. Remanufacture the products to convert them into model J16, a model that normally sells for $200. The additional cost to convert the J15 units would be $45; the standard cost to manufacture J16 is $125. Presently, there is sufficient capacity to manufacture product J16 directly or to do the necessary conversion work on J15.

Determine the net benefit to Attleboro of each alternative and state your recommendation.

Explanation / Answer

Sell to Exporter Remanufacture Revenue 12 9600 200 160000 Standard Cost 125 100000 Additional Cost 45 36000 Net Income 9600 24000

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