Mega Manufacturing Has Defective Inventory on Hand, Which Cost $27,000

question 63

Multiple Choice

Mega Manufacturing has defective inventory on hand, which cost $27,000 to manufacture. The company can sell the defective inventory as is for $18,000 or rework the units at a cost of $12,000 and sell the inventory for $26,000. The sunk cost and the opportunity cost of selling the inventory as is (rather than rework the units) are: Sunk Cost Opportunity Cost

• A) $0 $18,000
• B) $27,000 $14,000
• C) $27,000 $18,000
• D) $18,000 $14,000

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Definitions:

Operations

Activities involved in the day-to-day running of a business for the purpose of producing value for the stakeholders.

Investing Activities

Transactions involving the purchase or sale of long-term assets and investments, reflecting a company's spending or gains from such assets.

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of an entity.

Operations

Refers to the ongoing activities of a business that are involved in the production and distribution of products or services.