Sheffield Corp. has old inventory on hand that cost $33000. Its scrap value is $44000. The...
Sheffield Corp. has old inventory on hand that cost $33000. Its scrap value is $44000. The inventory could be sold for $110000 if manufactured further at an additional cost of $33000. What should Sheffield do?
a. Sell the inventory for $44000 scrap value
b. Dispose of the inventory to avoid any further decline in value
c. Hold the inventory at its $33000 cost
d. Manufacture further and sell it for $110000
Homework Answers
Incremental income = ($110,000 - $44,000) - $33,000 = $33,000
Since the incremental income is more than incremental cost, manufacture further and sell for $110,000.
Option d.
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