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:

Cash Cycle

The period between the outlay of cash for the purchase of inventory and the collection of cash from customers in a business operation, reflecting the liquidity and efficiency of the company.

Cash Cycle

The duration between the outlay of cash to produce goods or services and the collection of cash from sales.

Inventory Period

The average time that goods remain in inventory before being sold, a measure of inventory management efficiency.

Commercial Paper

An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities.