Scrap or process further decision (Learning Objective 7)

Auto Components has an inventory of 500 obsolete remote entry keys that are carried in inventory at a manufacturing cost of $80,000. Production Supervisor Terri Smith must decide to do one of the following:

• Process the inventory further at a cost of $20,000, with the expectation of selling it for $28,000

• Scrap the inventory for a sale price of $6,000 What should Smith do? Present figures to support your decision.