Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pleces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.30 pound. Last year, the company sold 42,000 lb. of scrap, which would be enough to make 10,500 teddy bears that the management of Quality is now Interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.80. Fixed costs would increase by $93,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 10,500 teddy bears per year. Finished teddy bears could be sold for $18.00 each. Calculate the effect on operating Income. Round your answers to the nearest dollar. Sell at Split-Off $ Process Further s Should Quality continue to sell the scrap cloth should Quality process the scrap Into teddy bears to sell? Sell the Scrap Feedback ✓ Check My Work What costs would be associated with deciding to sell at the split-off? What costs would be involved with processing further? This involves units sold and other per units amounts. How would these Items (for each scenario) affect operating Income?
Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pleces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.30 pound. Last year, the company sold 42,000 lb. of scrap, which would be enough to make 10,500 teddy bears that the management of Quality is now Interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.80. Fixed costs would increase by $93,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 10,500 teddy bears per year. Finished teddy bears could be sold for $18.00 each. Calculate the effect on operating Income. Round your answers to the nearest dollar. Sell at Split-Off $ Process Further s Should Quality continue to sell the scrap cloth should Quality process the scrap Into teddy bears to sell? Sell the Scrap Feedback ✓ Check My Work What costs would be associated with deciding to sell at the split-off? What costs would be involved with processing further? This involves units sold and other per units amounts. How would these Items (for each scenario) affect operating Income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pleces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.30 p
pound. Last year, the company sold 42,000 lb. of scrap, which would be enough to make 10,500 teddy bears that the management of Quality is now interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching
processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.80. Fixed costs would increase by $93,000 per year for the lease of the packaging equipment and Quality
estimates it could produce and sell 10,500 teddy bears per year. Finished teddy bears could be sold for $18.00 each.
Calculate the effect on operating Income. Round your answers to the nearest dollar.
Sell at Split-Off $
Process Further $
Should Quality continue to sell the scrap cloth or should Quality process the scrap Into teddy bears to sell?
Sell the Scrap
✔
Feedback
Check My Work
What costs would be associated with deciding to sell at the split-off? What costs would be involved with processing further? This involves units sold and other per units amounts. How would these Items (for each scenario) affect operating Income?
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