Question
Techzan's demand for its electronic devices has changed significantly, and the company has had to drop the selling price per unit from $45 to $38.
Techzan's demand for its electronic devices has changed significantly, and the company has had to drop the selling price per unit from $45 to $38. There are some units in the work in process inventory that have costs of $30 per unit associated with them. Techzan can sell these units in their current state for $22 each. Or, it will cost Techzan $11 per unit to rework these units so that they can be sold for $38 each. A new employee looks at the analysis and exclaims, Well lose money with either of these alternatives! Lets just throw these units in the trash! If the company decides to throw the units in the trash, what effect will this option have on net income?
Group of answer choices
Profit will decrease by $30 per unit for each unit discarded. The new employee should be fired.
Profit will decrease by $45 per unit for each unit discarded. The new employee should be fired.
Profit will decrease by $5 per unit for each unit discarded. The new employee should be fired.
Profit will increase by $11 per unit since the completion costs will not have to be incurred. The new employee should be promoted.
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