Hodge IncHas Some Material That Originally Cost $74,600

question 85

Multiple Choice

Hodge Inc.has some material that originally cost $74,600.The material has a scrap value of $57,400 as is,but if reworked at a cost of $1,500,it could be sold for $54,400.What would be the financial advantage (disadvantage) of reworking and selling the material rather than selling it as is as scrap?

• A) ($79,100)
• B) ($21,700)
• C) ($4,500)
• D) $52,900

---

Definitions:

FOB Shipping Point

A term used in shipping contracts to indicate that the buyer is responsible for the goods and shipping costs from the point of origin.

Perpetual Inventory System

An inventory tracking system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Debit Memo

A document issued to record a reduction in the balance due from a customer, often due to a return or correction.

Gross Profit

The difference between revenue and the cost of goods sold before expenses.