: Suppose that last period you produced widgets and over-estimated the demand for them, leaving you with 100 units of unsold inventory. The cost of materials that went into the widgets was $50 per unit. Currently, you could either sell them for scrap, giving you $10 per unit, or convert them to widget 2.0, which currently sell for $50 per unit, at a cost of $30. Which alternative would you choose? Does the material cost you spent on the widgets last period have any bearing on this calculation? I just need help with the first question, thanks.