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 $27 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 $54 each. Varto has two alternatives for these items: (1) they can be sold to a wholesaler for $9 each, or (2) they can be reworked at a cost of $215,100 and then sold for $27 each. Prepare an analysis to determine whether Varto should sell the products as is or rework them and then sell them. NCREMENTAL REVENUE AND COST OF ADDITIONAL Revenue if processed further Revenue if sold as is Incremental revenue Incremental net income(Loss) The company should

Explanation / Answer

INCREMENTAL REVENUE AND COST OF ADDITIONAL PROCESSING Revenue if processed further (11600*27] 313200 Revenue if sold as is (11600*9) 104400 Incremental revenue 208800 Further processing cost (215100) Incremental net income /(loss) (6300) The company should not process further rather sold sell them as it is

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