Question

Tori Inc. has some material that originally cost $72,000. The material has a scrap value of $31,900 as is, but if reworked at a cost of $2,300, it could be sold for $32,600. What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as scrap?

Answer 1

The answer is there will a loss of $1600 if the material is reworked rather than sold at scrap value.

Step-by-step explanation:

Sales value of reworked material: $32,600

Less: Cost to rework material: $2,300

Net Sales Value: $30,300

Current Scrap Value: $31,900

Net loss : $1,600

($1,600)