A company decides to close down its plastics division. It has on hand 20 tons of styrens monomer, a raw material that has a market price of $600 per ton, which had been originally purchased at $550 per ton. Given that the company has no use for the styrene monomer, and that it would cost the company $5,500 to store it, what is the value of the 20 tons of styrene monomer to the company?

A company decides to close down its plastics division. It has on hand 20 tons of styrens monomer, a raw material that has a market price of $600 per ton, which had been originally purchased at $550 per ton. Given that the company has no use for the styrene monomer, and that it would cost the company $5,500 to store it, what is the value of the 20 tons of styrene monomer to the company?

Name: A company decides to close down its plastics division. It has on hand
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: A company decides to close down its plastics division. It has on hand 20 tons of styrens monomer, a raw material that has amarket price of $600 per ton, which had been originally purchased at $550 per ton. Given that the company has no use for thest

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 22E: Thaler Company bought 26,000 of raw materials a year ago in anticipation of producing 5,000 units of...

See similar textbooks

Similar questions

1. Your company has a customer who is shutting down a production line, and it is your responsibility to dispose of the extrusion machine. The company could keep it in inventory for a possible future product and estimates that the reservation value is $100,000. Your dealings on the secondhand market lead you to believe that if you commit to a price of $200,000, there is a 0.5 chance you will be able to sell the machine. If you commit to a price of $300,000, there is a 0.2 chance you will be able to sell the machine. If you commit to a price of $400,000, there is a 0.15 chance you will be able to sell the machine. These probabilities are summarized in the following table. For each posted price, enter the expected value of attempting to sell the machine at that price. (Hint: Be sure to take into account the value of the machine to your company in the event that you are not be able to sell the machine.) Posted Price Probability of Sale Expected Value ($) ($) $400,000 0.15 $300,000 0.2…
Kim Yin Company has 15,000 units in inventory that had a production cost of $3 per unit. These units cannot be sold through normal channels due to a significant technology change. These units could be reworked at a total cost of $23,000and sold for $28,000. Another alternative is to sell the units to a junk dealer for $8,500. Should Kim Yin Company scrap or rework the units? By how much will they be better off? Please provide the answers as well as the solutions to the questions. Thank you!
The sales manager of Lugi Company is at a loss on what to do with 10,000 units of defective parts on stock with a cost of P 25,000. Two proposals submitted for his consideration are as follows: a) sell the parts as scrap for P 1.75 per unit. b) Re-work the parts at a cost of P 12,500 and sell them for P 5 per unit. What is the net advantage or disadvantage of the proposal to re-work? P 20,000 advantage P 37,500 advantage P 7,500 disadvantage P 12,500 advantage
Kim Yin Company has 15,000 units in inventory that had a production cost of $3 per unit. These units cannot be sold through normal channels due to a significant technology change. These units could be reworked at a total cost of $23,000and sold for $28,000. Another alternative is to sell the units to a junk dealer for $8,500. Should Kim Yin Company scrap or rework the units and By how much will they be better off?
So Hot Ltd has 5,000 units in inventory that cost $1.50 per unit to produce. Due to changing technology, the sales department is having difficulty selling the product. It will cost $2,000 to scrap the units. What is the minimum price for which So Hot should sell these units?
Your company has a customer who is shutting down a production line, and it is your responsibility to dispose of the extrusion machine. The company could keep it in inventory for a possible future product and estimates that the reservation value is $200,000. Your dealings on the secondhand market lead you to believe that if you commit to a price of $250,000, there is a 0.5 chance you will be able to sell the machine. If you commit to a price of $300,000, there is a 0.2 chance you will be able to sell the machine. If you commit to a price of $350,000, there is a 0.1 chance you will be able to sell the machine. These probabilities are summarized in the following table. For each posted price, enter the expected value of attempting to sell the machine at that price. (Hint: Be sure to take into account the value of the machine to your company in the event that you are not be able to sell the machine.) Posted Price Probability of Sale Expected Value ($) ($) $350,000 0.1…
Your company has a customer who is shutting down a production line, and it is your responsibility to dispose of the extrusion machine. The company could keep it in inventory for a possible future product and estimates that the reservation value is $100,000. Your dealings on the secondhand market lead you to believe that if you commit to a price of $200,000, there is a 0.4 chance you will be able to sell the machine. If you commit to a price of $300,000, there is a 0.25 chance you will be able to sell the machine. If you commit to a price of $400,000, there is a 0.1 chance you will be able to sell the machine. These probabilities are summarized in the following table. For each posted price, enter the expected value of attempting to sell the machine at that price. (Hint: Be sure to take into account the value of the machine to your company in the event that you are not be able to sell the machine.) Posted Price Probability of Sale Expected Value ($) ($) $400,000 0.1 $300,000 0.25…
Kim Yin Company has 15,000 units in inventory that had a production cost of $3 per unit. These units cannot be sold through normal channels due to a significant technology change. These units could be reworked at a total cost of $23,000and sold for $28,000. Another alternative is to sell the units to a junk dealer for $8,500. By how much will they be better off?
Collins Company has some outdated products that originally cost $80,000 to make. The products have a current resale value of $36,000 as is, but if reworked at a cost of $20,000, they could be sold for $60,000. What is the financial advantage or disadvantage of reworking the products? a)$4,000 financial advantage b)$16,000 financial advantage c)$6,000 financial disadvantage d)$20,000 financial disadvantage
Otool Incorporated is considering using old raw material in a special project. The special project would require all 150 kilograms of the raw material that are in stock and that originally cost the company $2,346 in total. If the company were to buy new supplies of this raw material on the open market, it would cost $8 per kilogram. However, the company has no other use for this raw material and would sell it at the discounted price of $7.20 per kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the purchaser at a total cost of $74 for all 150 kilograms. What is the relevant cost of the 150 kilograms of the raw material when deciding whether to proceed with the special project? Multiple Choice $1,165 $1,080 $1,006 $1,185
BT&T Corporation manufactures telephones. Recently , the company produced a batch of 600 defective telephones at a cost of $9,000. BT &T can sell these telephones as scrap for $9 each. It can also rework the entire batch at a cost of $6,500 , after which the telephones could be sold for $20 per unit. If BT&T reworks the defective telephones , by how much will its operating income change ?
Warner Corporation purchased a machine 7 years ago for $350,000 when it launched product P50. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 300 machine costing $342,450 or by a new model 200 machine costing $290,800. Management has decided to buy the model 200 machine. It has less capacity than the model 300 machine, but its capacity is sufficient to continue making product P50. Management also considered, but rejected, the alternative of dropping product P50 and not replacing the old machine. If that were done, the $290,800 invested in the new machine could instead have been invested in a project that would have returned a total of $400,400. Required: 1. What is the total differential cost regarding the decision to buy the model 200 machine rather than the model 300 machine? 2. What is the total sunk cost regarding the decision to buy the model 200 machine rather than the model 300 machine? 3. What is the total…