Waltherboro Company Recently Discontinued the Manufacture of Product J15 There Are 800 Units of This Product in Finished-Goods Inventory

Essay

Waltherboro Company recently discontinued the manufacture of product J15. The standard costs for this product were: $\begin{array}{lr}\text { Direct material } & \$ 50 \\\text { Direct labor } & 20 \\\text { Variable overhead } & 14 \\\text { Fixed overhead } & 35\\\text { Total }&\$119\end{array}$
There are 800 units of this product in finished-goods inventory. The units are technologically obsolete, and the following alternatives are being considered:
1. Dispose of as scrap. The proceeds from the sale will equal the cost of transportation to the disposal site.
2. Sell to an exporter for sale in a developing country. The sales price to the exporter would be $12 per unit.
3. Remanufacture the products to convert them into model J16, a model that normally sells for $200. The additional cost to convert the J15 units would be $45; the standard cost to manufacture J16 is $125. Presently, there is sufficient capacity to manufacture product J16 directly or to do the necessary conversion work on J15.
Required:
A. Determine the current carrying value of the J15 inventory.
B. Evaluate each alternative and determine the financial benefit to Waltherboro if the alternative is pursued.