Armstrong Corporation manufactures bicycle parts. The company currently has a $1
ID: 2466448 • Letter: A
Question
Armstrong Corporation manufactures bicycle parts. The company currently has a $19,300 inventory of parts that have become obsolete due to changes in design specifications. The parts could be sold for $7,100, or modified for $9,900 and sold for $21,300.
Calculate the benefit under each alternative for disposing of the obsolete parts.
Armstrong Corporation manufactures bicycle parts. The company currently has a $19,300 inventory of parts that have become obsolete due to changes in design specifications. The parts could be sold for $7,100, or modified for $9,900 and sold for $21,300.
2-a.Calculate the benefit under each alternative for disposing of the obsolete parts.
Benefit if parts are sold without modification Net benefit if parts are sold after being modifiedExplanation / Answer
Before Modification
Cost of Inventory of parts $19,300
Sales price without modification $7,100
Loss from sale $12,200
After modification
Cost of Inventory of parts $19,300
Cost of modification $9,900
Total cost $29,200
Less: Sale price $21,300
Loss from sale $7,900
From the above analysis it is evident that the loss after modification is less than before modification, therefore it is recommended that the modification be carried out to reduce the loss.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.