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:

Uncollectible Accounts Receivable

Accounts receivable that are considered to be uncollectible due to the inability of the customers to pay.

Journal Entries

Recorded transactions in the accounting system, documenting financial changes in accounts.

Percent of Sales

Percent of sales is a financial analysis tool that helps in estimating how certain accounts, like revenue and expenses, will vary in proportion to changes in sales.

Bad Debts

Debts that are not recoverable and are written off as a loss by the business because they cannot be collected.