Garcia Company has 11,500 units of its product that were produced at a cost of $172,500. The units were damaged in a rainstorm. Garcia can sell the units as scrap for $34,500, or it can rework the units at a cost of $54,000 and then sell them for $71,100. (a) Prepare a scrap or rework analysis of income effects. (b) Should Garcia sell the units as scrap or rework them and then sell them? (a) Scrap or Rework Analysis Scrap Rework Revenue from scrapped/reworked units Cost of reworked units Income Incremental income (b) The company should: Rework and sell units Sell the units as scrap

Garcia Company has 11,500 units of its product that were produced at a cost of $172,500. The units were damaged in a rainstorm. Garcia can sell the units as scrap for $34,500, or it can rework the units at a cost of $54,000 and then sell them for $71,100. (a) Prepare a scrap or rework analysis of income effects. (b) Should Garcia sell the units as scrap or rework them and then sell them? (a) Scrap or Rework Analysis Scrap Rework Revenue from scrapped/reworked units Cost of reworked units Income Incremental income (b) The company should: Rework and sell units Sell the units as scrap

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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