Hip Manufacturing produces denim clothing. This year it produced 3,020 denim jackets at a cost of $90,600. These jackets were damaged in the warehouse during storage. Management identified three alternatives for these jackets. 1. Jackets can be sold as scrap to a secondhand clothing shop for $18,120. 2. Jackets can be disassembled at a cost of $6,040 and sold to a recycler for $36,240. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $102,680, and the jackets can then be sold for $135,900. Required: (1) Compute the income for each alternative. (2) Which alternative should be chosen?
Hip Manufacturing produces denim clothing. This year it produced 3,020 denim jackets at a cost of $90,600. These jackets were damaged in the warehouse during storage. Management identified three alternatives for these jackets. 1. Jackets can be sold as scrap to a secondhand clothing shop for $18,120. 2. Jackets can be disassembled at a cost of $6,040 and sold to a recycler for $36,240. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $102,680, and the jackets can then be sold for $135,900. Required: (1) Compute the income for each alternative. (2) Which alternative should be chosen?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Hip Manufacturing produces denim clothing. This year it produced 3,020 denim jackets at a cost of $90,600. These jackets were
damaged in the warehouse during storage. Management identified three alternatives for these jackets.
1. Jackets can be sold as scrap to a secondhand clothing shop for $18,120.
2. Jackets can be disassembled at a cost of $6,040 and sold to a recycler for $36,240.
3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $102,680, and the jackets can then
be sold for $135,900.
Required:
(1) Compute the income for each alternative.
(2) Which alternative should be chosen?
Scrap, Recycle or Rework Analysis
Revenue from scrap/recycle/rework
Cost of recycled/reworked units
Income
Scrap
Recycle
Rework
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