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Hip Manufacturing produces denim clothing. This year it produced 3,340 denim jackets at a cost of $100,200. 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 $20,040. 2. Jackets can be disassembled at a cost of $6,680 and sold to a recycler for $40,080. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $113,560, and the jackets can then be sold for $150,300. Required: (1) Compute the income for each alternative. (2) Which alternative should be chosen?

Hip Manufacturing produces denim clothing. This year it produced 3,340 denim jackets at a cost of $100,200. 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 $20,040. 2. Jackets can be disassembled at a cost of $6,680 and sold to a recycler for $40,080. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $113,560, and the jackets can then be sold for $150,300. Required: (1) Compute the income for each alternative. (2) Which alternative should be chosen?

FINANCIAL ACCOUNTING
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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Hip Manufacturing produces denim clothing. This year it produced 3,340 denim jackets at a cost of $100,200. 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 $20,040. 2. Jackets can be disassembled at a cost of $6,680 and sold to a recycler for $40,080. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $113,560, and the jackets can then be sold for $150,300. 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 Scrap Recycle Rework Income $ 0 $ 0 $ 0
Transcribed Image Text:Hip Manufacturing produces denim clothing. This year it produced 3,340 denim jackets at a cost of $100,200. 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 $20,040. 2. Jackets can be disassembled at a cost of $6,680 and sold to a recycler for $40,080. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $113,560, and the jackets can then be sold for $150,300. 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 Scrap Recycle Rework Income $ 0 $ 0 $ 0
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