Question

Over-the-counter medicines are required by law to show the date through which the manufacturer guarantees full potency. Many distributors will not accept delivery of product that is within a year of its expiration date. A batch of Allround is within six months of expiration, and you need to decide what to do with it. One option is to ship the product and hope that distributors do not return it. If they do, you will need to ship new product and dispose of the returns. In addition to the cost, the returns could strain your relationship with the distributors. Another option is to dispose of the whole batch up front at a cost of $100,000 and avoid the appearance of trying to dump old product on your distributors. Finally, you could sell the inventory to a jobber who has a more flexible policy on expiration dates, but they are offering to buy it below cost, so there will be a net charge to you of $50,000. How do you want to handle the expiring batch of product?

Answer 1

Answer Sell to a jobber

Explanation:

The sales to a jobber will take of the burden of the expiry product away from you at a cost of $50,000.

This is better when compared to the option of selling it upfront which we Incurred a cost of $100,000 .

The worst is delivering to the customers whithin the exipiry period and risking the price of the whole product and negative busines relationship.