Question

Oak, Inc. has decided to discontinue manufacturing its Quantum model personal organizer. Currently the company has a number of partially completed personal organizers on hand. The company has spent $114 per unit to manufacture these organizers. To complete each unit, costs of $13 for material and $17 for direct labor will be incurred. In addition, $9 of variable overhead and $35 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will be added per unit.

If Oak, Inc., completes the organizers, it can sell them for $137 per unit. Another manufacturer is interested in purchasing the partially completed organizers for $104 per unit and converting them into inventory tracking devices.

Determine whether Oak should complete the personal organizers or sell them in their current state.

Oak, Inc., should

complete the personal organizerssell them in their current state

. The company will be better off by $ per organizer.

Answer 1

ANSWER

1)

If they complete the organizers
Amount spent so far (Per unit)	$114
Additional material cost to complete	$13
Additional direct labor material costs to complete	$17
Variable overhead costs	$9
Total Cost (Per unit)	$153
Selling Price	$137
Loss on per unit sold	$16

If they sell the partially completed units
Amount spent so far (Per unit)	$114
Selling Price	$104
Loss per unit sold	$10

If the company sell the partially completed unit than its batter for the company because partially completed unit lose only $10 per unit.

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