The relevance of the data given in the exercise to the decision about what to do with the obsolete parts:
The importance of Decision lies in the way it allows you in choosing from various options. earlier than you make a decision, there is a need to gather all available information and weigh its professionals and cons. its miles vital to focus on steps that can help in taking the right selections.
1A) Decision regarding the relevance or irrelevance of data
Decision
Current sales value for unmodified parts Relevant
Sales value for modified parts Relevant
Modification costs Relevant
Current book value of inventory Irrelevant
1B) Calculate the benefit under each alternative for disposing of obsolete parts.
Benefit if parts are sold without modification $7,100
Net benefit if parts are sold after being modified = $21300-$9900 $11,400
1C) How should the obsolete parts be disposed of?
How should the obsolete parts be disposed of?
It should be sold after modification
Parts should be sold after modification as it will generate extra benefits without modification net benefit is $7100 and after modification net benefit is $11400.
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