Varto Company has 7,000 units of its sole product in inventory that it produced
ID: 2497143 • Letter: V
Question
Varto Company has 7,000 units of its sole product in inventory that it produced last year at a cost of $22 each. This year’s model is superior to last year’s and the 7,000 units cannot be sold at last year’s regular selling price of $35 each. Varto has two alternatives for these items: (1) they can be sold to a wholesaler for $8 each, or (2) they can be reworked at a cost of $125,000 and then sold for $25 each. Prepare an analysis to determine whether Varto should sell the products as is or rework them and then sell them.
Explanation / Answer
Sell it as it is as the incremental profit is high in such case
Particulars As it is Reworked Revenue 56000 175000 Less : Reworking Cost 0 125000 Net Profit 56000 50000Related Questions
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