A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has10,000 defective units that cost $5.30 per unit to manufacture. The units can be a) sold as is for $3.10 each, or b) reworked for $4.60each and then sold for the full price of $8.40 each.What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the unitsas scrap or rework them? (Enter costs and losses as negative values.)Cost of scrap unitsCost to rework unitsOpportunity cost of not making new unitsSales of reworked unitsSales of scrap unitsSale as Scrap$< Prev0 $Rework4 of 110‒‒‒www1Next > A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has10,000 defective units that cost $5.30 per unit to manufacture. The units can be a) sold as is for $3.10 each, or b) reworked for $4.60each and then sold for the full price of $8.40 each.What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the unitsas scrap or rework them? (Enter costs and losses as negative values.)Incremental income (loss)The company should:Sale as Scrap$< Prev0$Rework4 of 11wwwM0Next >

Incremental income is the amount of extra money earned by putting an extra effort on products or…

A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 10,000 defective units that cost $5.30 per unit to manufacture. The units can be a) sold as is for $3.10 each, or b) reworked for $4.60 each and then sold for the full price of $8.40 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.) Cost of scrap units Cost to rework units Opportunity cost of not making new units Sales of reworked units Sales of scrap units Sale as Scrap $ 0 $ Rework 0

A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 10,000 defective units that cost $5.30 per unit to manufacture. The units can be a) sold as is for $3.10 each, or b) reworked for $4.60 each and then sold for the full price of $8.40 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.) Cost of scrap units Cost to rework units Opportunity cost of not making new units Sales of reworked units Sales of scrap units Sale as Scrap $ 0 $ Rework 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Futura Company purchases the 76,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.60 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.70 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.50 1.80 1.40 0.60 0.40 $ 13.70 Financial advantage Total $ 221,600 $ 136,800 $ 106,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $136,800) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $86,000…
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Answer the following questions. A company has an inventory of 1,350 assorted parts for a line of missiles that has been discontinued. The inventory cost is $76,000. The parts can be either (a) remachined at total additional costs of $27,500 and then sold for $33,000 or (b) sold as scrap for $4,000. Which action is more profitable? Show your calculations. A truck, costing $101,500 and uninsured, is wrecked its first day in use. It can be either (a) disposed of for $15,500 cash and replaced with a similar truck costing $102,000 or (b) rebuilt for $82,000, and thus be brand-new as far as operating characteristics and looks are concerned. Which action is less costly? Show your calculations. 1. 2. 1. A company has an inventory of 1,350 assorted parts for a line of missiles that has been discontinued. The inventory cost is $76,000. The parts can be either (a) remachined t total additional costs of $27,500 and then sold for $33,000 or (b) sold as scrap for $4,000. Which action is more…
Sweet Acacia Inc. makes unfinished bookcases that it sells for $58. Production costs are $38 variable and $9 fixed. Because it has unused capacity, Sweet Acacia is considering finishing the bookcases and selling them for $72. Variable finishing costs are expected to be $7 per unit with no increase in fixed costs. Prepare an analysis on a per-unit basis that shows whether Sweet Acacia should sell unfinished or finished bookcases. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Sales per unit Variable cost per unit Fixed cost per unit Total per unit cost Net income per unit The bookcases 69 $ Sell ✓processed further. LA GA Process Further $ $ Net Income Increase (Decrease)
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