An Employee of Morgan Corporation Has Found Some Partially Completed

question 164

Essay

An employee of Morgan Corporation has found some partially completed units of Model X in a dusty corner of the warehouse. A job ticket attached to the units indicates that a total of $750 in manufacturing costs have been used to bring the materials to this point in the manufacturing process. The units can be sold in their current condition for $275 to a scrap metal dealer. If Morgan spends $250 to complete the units, they could be sold for $600.​
(a) What should Morgan do? Why?
(b) Identify the sunk cost, if any.

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Definitions:

Treasury Shares

Treasury shares are previously issued shares that have been bought back by the issuing company, reducing the amount of outstanding stock on the open market.

Market Price

The current price at which an asset or service can be bought or sold in an open and competitive market.

Gross Profit Percentage

A financial ratio expressing gross profit as a percentage of revenue, indicating the efficiency of production or service delivery.

Net Profit Margin Percentage

This is a financial metric that represents the percentage of revenue that remains as profit after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from a company's total revenue.