Question: Suppose your company has just discovered $100,000 worth (this is the original manufacturing cost) of obsolete inventory in an old warehouse. Your boss asks you to evaluate two options:
(1) remachine the obsolete parts at a cost of $30,000 and then hopefully resell them for $60,000 or
(2) scrap them for $15,000 cash (which is certain) through a secondhand market. What recommendation would you make to your boss? Explain your reasoning.