The Lantern Corporation has 1,000 obsolete lanterns that are carried in inventory at a manufacturing cost of $30,000. If the lanterns are re-machined for $4,000, they could be sold for $10,000. Alternatively, the lanterns could be sold for scrap for $2,000. Which alternative is more desirable, and what are the total relevant costs for that alternative?

Question 15Answer

a.

Scrap and $28,000

b.

Re-machine and $4,000

c.

Re-machine and $34,000

d.

Scrap and $30,000