Question
ABC Corporation sells miniature cars made of aluminum. It has 9,000 cars in inventory (that cost $7.25 per unit to produce) that are not suitable
ABC Corporation sells miniature cars made of aluminum. It has 9,000 cars in inventory (that cost $7.25 per unit to produce) that are not suitable to sell because of quality problems. ABChas three options: (1) Write off the inventory as obsolete and dispose them safely at a cost $0.10 per unit. (2) Re-work all the cars at a cost of $3.15 per car and sell them to outlet stores at a unit price of $3.45. (3) Sell the cars to a scrap dealer for $0.30 per unit (4) Melt the cars and use the aluminium content in current production that can saveraw material cost of $2,600 in next month's production. Selectall statements, from among the five statements given below,that aretrue.Apply the definitions of "value of option" and "opportunity cost of option" developed when we discussed the decision making framework in class.
A.Value of option 2 is $31,050
B.Option 4's value is $100less than its opportunity cost
C.
Opportunity cost of option 1 is $1,800 less than the opportunity cost of option 2.D.Opportunity cost of option 2is less than the opportunity cost of option 3
E.Opportunity cost of all four options are equal.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started