As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units?

Question

Business

Gisselle

24 April, 22:58

As a separate matter from the special order, assume the company's inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units?

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Wayne Cooke · Answer 1

variable selling and administrative costs

Explanation:

There are 10,000 units left which the company may choose to ignore directly or try to sell them at very discounted prices. In order to establish a minimum price, you must consider that any construction costs are sinking and that the selling price should include at least administrative and selling costs. Manufacturing costs are considered a loss for accounting purposes, so the company must decide whether to sell them directly or ignore them directly (or donate them, depending on the type).