Janssen Company has old inventory on hand that cost $24,000. Its scrap value is $32,000. The inventory could be sold for $80,000 if manufactured further at an additional cost of $24,000. What should Janssen do?
A) Sell the inventory for $32,000 scrap value
B) Dispose of the inventory to avoid any further decline in value
C) Hold the inventory at its $24,000 cost
D) Manufacture further and sell it for $80,000.

Question

Quizplus · Accepted Answer

Manufacturing further and selling the inventory for $80,000 would result in a net gain of $32,000 ($80,000 - $24,000 - $24,000) over the scrap value option. Holding the inventory at its cost or disposing of it would result in a loss of $24,000.

Janssen Company Has Old Inventory on Hand That Cost $24,000