Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pieces for each product, a certain amount of scrapcloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.15 per pound. Last year, the company sold 39,000 lb. of scrap, which wouldbe enough to make 9,750 teddy bears that the management of Quality is now interested in producing. Their processes would need some reprogramming, particularly inthe cutting and stitching processes,but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce theteddy bears $3.80. Fixed costs would increase by $94,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 9,750 teddybears 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 $ 122,850Process Further $42,450 XShould Quality continue to sell the scrap cloth or should Quality process the scrap into teddy bears to sell?Sell the Scrap

Given, Information regarding the Quality Clothing, Inc.

Answered: Quality Clothing, Inc., produces skorts…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 11PA: Quality Clothing, Inc., produces skorts and jumper uniforms for schoolchildren. In the process of...

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Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.15 per pound. Last year, the company sold 40,000 lb. of scrap, which would be enough to make 10,000 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 $3.85. Fixed costs would increase by $95,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 10,000 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…
Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorge's Scrap Warehouse for $3.15 per pound. Last year, the company sold 39,000 lb. of scrap, which would be enough to make 9,750 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 $94,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 9,750 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…
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