Varto Company has 11,600 units of its sole product in inventory that it produced

Question

Varto Company has 11,600 units of its sole product in inventory that it produced last year at a cost of $29 each. This year's model is superior to last year's and the 11,600 units cannot be sold at last year s regular selling price of $42 each. Varto has two alternatives for these items: (1) they can be sold to a wholesaler for $15 each, or (2) they can be reworked at a cost of $227,000 and then sold for $34 each. Prepare an analysis to determine whether Varto should sell the products as is or rework them and then sell them.

Explanation / Answer

Incremental net loss is comming so better to sold as and should not supposed to processed further

Incremental Revenue and cost of addiitional Processing Particulars Amount $ Revenue if further Processed(11,600*$34) 394,400 Revenue if sold as (11,600*$15) 174,000 Incremental Revenue 220,400 Less:Additional Cost 227,000 Incremental net Income (Loss) (6,600)

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