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Madison Ironworks made 400 defective units last month. Fortunately, the units were identified as defective before they were sold to customers. They are currently included
Madison Ironworks made 400 defective units last month. Fortunately, the units were identified as defective before they were sold to customers. They are currently included in Madison's ending inventory balance at $100 each. At the end of the quarter, the company will have to write off their $40,000 cost, since the units have no value in their present condition.The production manager has determined that the units could be reworked for $20 each and then sold for $35. He has also received a bid from a liquidation company to purchase the defective units for $18 each. What alternatives are available to Madison? What information is irrelevant to the decision? Which alternative would generate the best financial result? The Martinez Company manufactures 4,600 units of a part that could be purchased from an outside supplier for $14 each. Martinez's costs to manufacture each part are as follows: All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses. (ab) (a) Calculate relevant cost to make. Relevent cost to make $ per unit (b) Should Martinez continue to manufacture the part? (c) If Martinez could lease the manufacturing facilities to another company for $24,600 per year, what would be the net total cost to outsource production of the part? Net cost to buy $ (d) Should Martinez outsource production of the part given the opportunity to lease the facilities
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