Toys Ahoy! has 1,000 action figures in inventory that cost $6.25 per unit to produce. Due to changing consumer preferences, the sales department is having great difficulty selling the action figures, and Toys Ahoy! must choose between two options. Option 1-scrap (dispose of) the action figures at a total cost of $1,000 (for transportation and landfill fees); Option 2-rework all of the action figures, at a total cost of $1,200 in labor and materials, and sell them to a local toy store for a total of $750. Required: (If the answer results in a cost to the company, put the answer in parenthesis eg (500).
a. What is the value of scrapping the action figures?
b. What is the value of reworking the action figures and selling them to the toy store?