Question

Chang Industries has 2,800 defective units of product that have already cost $14.80 each to produce. A salvage company will purchase the defective units as they are for $5.80 each. Chang's production manager reports that the defects can be corrected for $5.20 per unit, enabling them to be sold at their regular market price of $22.60. The Incremental Income or loss on reworking the units is:_______.A. $32,480 loss.B. $32,480 income.C. $14,560 loss.D. $47,040 income.E. $48,720 income.

Answer 1

A. $32,480

Step-by-step explanation:

Calculation for The Incremental Income or loss on reworking the units

First step is to calculate the incremental revenue from reworking

Incremental revenue from reworking= ($22.60- $5.80)

Incremental revenue from reworking (= $16.80

Second step is to calculate net benefit per unit to rework

Net benefit per unit to rework= 16.80- 5.20

Net benefit per unit to rework = $11.60

Last step is to calculate the incremental income from reworking

Incremental income from reworking= ($11.60* 2,800 units)

Incremental income from reworking = $32,480

Therefore The Incremental Income or loss on reworking the units is:$32,480