Float Boat ended its busy season with an inventory of 10000 plastic blow-up tubes that cost ($
Question:
Float Boat ended its busy season with an inventory of 10000 plastic blow-up tubes that cost \(\$ 120000\) to manufacture. The business has two choices. One is that it can store the tubes for six months and sell them for \(\$ 8.00\) each the following year. Storage would cost \(\$ 6500\), and Float Boat knows that at least 30 per cent of the plastic blow-up tubes would deteriorate during storage. The deteriorated tubes would have no value. The only other alternative is to have a clearance sale now and sell the boats for \(\$ 6.00\) each. Float Boat believes that all of the tubes can be sold if it spends \(\$ 12000\) to advertise the sale.
Required:
Based on this information, prepare an analysis showing the relevant costs and revenues of each alternative, and decide which alternative Float Boats should choose.
Step by Step Answer:
Accounting Information For Business Decisions
ISBN: 9780170253703
2nd Edition
Authors: Billie Cunningham, Loren A. Nikolai, John Bazley, Marie Kavanagh, Geoff Slaughter, Sharelle Simmons