Varto Company has 7,000 units of its sole product in inventory that it produced last year at a cost of $22 each. This years model is superior to last years, and the 7,000 units cannot be sold at last years regular selling price of $35 each. Varto has two alternatives for these items: (1) they can be sold to a wholesaler for $8 each or (2) they can be reworked at a cost of $125,000 and then sold for $25 each. Prepare an analysis to determine whether Varto should sell the products as is or rework them and then sell them.

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INCREMENTAL REVENUE AND COST OF ADDITIONAL PROCESSING Revenue if processed further Revenue if sold as is Incremental revenue Less: Incremental cost of processing Incremental net income(Loss) The company should: Sell as is