Reason Food Store Has 4,000 Pounds of Raw Pork Approaching

question 104

Multiple Choice

Reason Food Store has 4,000 pounds of raw pork approaching its expiration date.Each pound has a cost of $4.50.The pork could be sold 'as is' for $3.00 per pound to the dog food processing plant, or roasted and sold in the deli.The cost of roasting the pork will be $2.80 per pound and each pound could be sold for $6.50.What should be done with the pork and why?

• A)The pork should be thrown away since there will be a loss with each of the other alternatives.
• B)The pork should be processed further since the sales price increases by $3.50 per pound and the cost only increases by $2.80 per pound.
• C)The pork should be sold 'as is' since there is no reason to put more cost into a product that is already selling below its $4.50 cost.
• D)It does not matter which option is undertaken since all alternatives result in a loss.

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Definitions:

Unit Sold

The quantity of items or products that have been sold.

Direct Manufacturing Cost

The sum of all the cost components that are directly attributable to the production process, including direct materials and direct labor.

Units Produced

The total number of units of a product that have been manufactured during a specific period.

Manufacturing Overhead Costs

The indirect costs associated with manufacturing, including costs related to running the factory floor that are not directly traceable to specific units of products.