Question

Beca, Inc. has decided to discontinue manufacturing its Quantum model credit card reader. Currently the company has a number of partially completed readers on hand. The company has spent $111 per unit to manufacture these credit card readers. To complete each unit, costs of $15 for material and $17 for direct labor will be incurred. In addition, $11 of variable overhead and $34 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will be added per unit.

If Beca, Inc., completes the readers, it can sell them for $132 per unit. Another manufacturer is interested in purchasing the partially completed readers for $99 per unit and converting them into inventory tracking devices.

Determine whether Beca should complete the credit card readers or sell them in their current state.

Beca, Inc., should select an option                                                          complete the personal organizerssell them in their current state. The company will be better off by $enter a dollar amount per unit  per unit.

Answer 1

Beca, Inc. has decided to discontinue manufacturing in QWuantum model credit card reader.

It has already incurred $111/unit.

in addition it needs to incur $15 + $17 +$11 + $34 on material, labour, overheads and fixed cost respectively(per unit)

= $111 + $ 77 = $188

If beca completes the readers it can sell them for $ 132 per unit, that would be at a loss of $ (188-132)= $56

If another manufacturer partially purchases the products it will make a loss of $(111- 99) = $12

Hence, Beca, Inc should not complete the units and should sell them partially completed to the other manufacturer