Marigold Corp. has old inventory on hand that cost $12000. Its scrap value is $14000. The inventory could be sold for $30000 if manufactured further at an additional cost of $12000. What should Marigold do?

Manufacture Inventory further and sell for $30,000

Explanation:

To make this decision we would have to calculate the benefit that could be acquired from manufacturing further.

Amount net benefit if manufactured further and sold for $30,000

= 30,000 - 12,000

= 18,000

There would be a net benefit of $18,000 of manufactured further.

If Marigold Corp. sold at the scrap value there would get $14,000.

We can see that Manufacturing further and selling for $30,000 is the better option as it brings more money. It should therefore be chosen.

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