What is the purpose of salvage value in obsolescence risk management?

• A. Ignoring salvage opportunities.
• B. Recollecting all items for reworking.
• C. Recovering value from obsolete items to reduce total cost.
• D. Writing off the full loss immediately.

Answer: (C)

Salvage value is the amount that can be recovered from items that have become obsolete, through sale, reuse, or recycling. In obsolescence risk management, it provides a way to offset losses by reducing the net cost of owning or disposing of assets. By estimating and pursuing salvage value, you can plan disposal or salvage actions, recover proceeds from surplus markets, and incorporate those recoveries into total cost calculations. This makes recovering value from obsolete items to reduce total cost the best approach. Ignoring salvage opportunities, reworking everything, or writing off the full loss ignores the financial upside salvage can offer and increases overall cost.