Question: Obsolete Inventory The New York bookstore bought more "Jets Champs" calendars than it could sell. It was nearly June and 220 calendars remained in stock. The store paid $4.25 each for the calendars and normally sold them for $8.85. Since February, they had been on sale for $6.20, and 2 weeks ago the price was dropped to $4.95. Still, few calendars were being sold. The bookstore manager thought it was no longer worthwhile using shelf space for the calendars. The proprietor of Old Orchard Collectibles offered to buy all 220 calendars for $88. He intended to store them until the 2013 football season was over and then sell them as novelty items. The bookstore manager was not sure she wanted to sell for $.40 calendars that cost $4.25. The only alternative, however, was to scrap them because the publisher would not take them back.
1. Compute the difference in profit between accepting the $88 offer and scrapping the calendars.
2. Describe how the $4.25 * 220 = $935 paid for the calendars affects your decision.