Sale as Scrap Rework Incremental income (loss) The company should:
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 1DQ
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Question
A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that cost $5.70 per unit to manufacture. The units can be a) sold as is for $3.20 each, or b) reworked for $4.70 each and then sold for the full price of $8.90 each.
What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)
![Sale as Scrap
Rework
Incremental income (loss)
The company should:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F44ba84ef-fbb4-4f4d-b035-37a11112949f%2F525513fc-5cd8-4766-be3b-5eabe7c43235%2Fkqrnza.png&w=3840&q=75)
Transcribed Image Text:Sale as Scrap
Rework
Incremental income (loss)
The company should:
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