Question

A company ust decide between scrapping or reworking units that do not pass inspection. The company has 44.000 defective units that have already cost $274,000 to manufacture. The units can be sold as scrap for $162.000 or reworked for $205,500 and then sold for $388,000. If the company decides to rework the units. Incremental income equals 018747

Multiple Choice
A) $20.500
B) $182.500
C) $191,250)
D) $39.000
E) $226.000

Answer 1

The incremental income for reworking the units is $182,500.

Step-by-step explanation:

To determine the incremental income, we need to calculate the incremental costs and incremental revenues.

The incremental cost of reworking the units is $205,500. The incremental cost is the additional cost incurred by choosing to rework the units instead of selling them as scrap.

The incremental revenue from reworking and selling the units is $388,000.

Therefore, the incremental income is calculated as:

Incremental Income = Incremental Revenue - Incremental Cost

= $388,000 - $205,500

= $182,500

Thus, the incremental income is $182,500.