Harold Manufacturing produces denim clothing. This year, it produced 5,000 denim jackets at a manufacturing cost of $45 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets. 1. Jackets can be sold to a second-hand clothing shop for $6 each. 2. Jackets can be disassembled at a cost of $32,000 and soid to a recycler for $12 each. 3. Jackets can be reworked and turned into good jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,000 jackets into only 3,000 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $102.00o0, but the jackets can then be sold for their regular price of $45 each. Required: 1. Calculate the incremental income.
Harold Manufacturing produces denim clothing. This year, it produced 5,000 denim jackets at a manufacturing cost of $45 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets. 1. Jackets can be sold to a second-hand clothing shop for $6 each. 2. Jackets can be disassembled at a cost of $32,000 and soid to a recycler for $12 each. 3. Jackets can be reworked and turned into good jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,000 jackets into only 3,000 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $102.00o0, but the jackets can then be sold for their regular price of $45 each. Required: 1. Calculate the incremental income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Harold Manufacturing produces denim clothing. This year, it produced 5,000 denim jackets at a manufacturing cost of $45 each.
These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives
for these Jackets.
1. Jackets can be sold to a second-hand clothing shop for $6 each.
2. Jackets can be disassembled at a cost of $32,000 and sold to a recycler for $12 each.
3. Jackets can be reworked and turned into good jackets. However, with the damage, management estimates it will be able to
assemble the good parts of the 5,000 jackets into only 3,000 jackets. The remaining pieces of fabric will be discarded. The cost of
reworking the jackets will be $102,000, but the jackets can then be sold for their regular price of $45 each.
Required:
1. Calculate the incrementai income.
Alternative 3
Alternative 1
Sell to a second-
hand shop
Alternative 2
Disassemble and Rework and sell at
sell to a recycler
regular prices
Incremental revenue
Incremental costa
Incremental inoome
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