Varto Company has 11,000 units of its sole product in inventory that it produced

Question

Varto Company has 11,000 units of its sole product in inventory that it produced last year at a cost of $31 each. This year's model is superior to last year's and the 11,000 units cannot be sold at last year's regular selling price of $37 each. Varto has two alternatives for these items: (1) they can be sold to a wholesaler for $11 each, or (2) they can be processed further at a cost of $226,500 and then sold for $31 each. Prepare an analysis to determine whether Varto should sell the products as is or process them further and then sell them INCREMENTAL REVENUE AND COST OF ADDITIONAL PROCESSING Revenue if processed further Revenue if sold as is Incremental revenue Incremental net income(Loss) The company should

Explanation / Answer

Prepare an analysis to determine whether should sell the products as is or process them further and then sell them :

The company should sell as is not further processed

Revenue if processes further (11000*31) 341000 Revenue if sold as is (11000*11) (121000) Incremental revenue 220000 Incremental cost (226500) Inremental net income (loss) (6500) The company should Sell as is

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