Question

Harold Manufacturing produces denim clothing. This year, it produced 5,140 denim jackets at a manufacturing cost of $41.00 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets. 1. Jackets can be sold to a secondhand clothing shop for $8.00 each. 2. Jackets can be disassembled at a cost of $32,200 and sold to a recycler for $11.00 each. 3. Jackets can be reworked and turned into good jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,140 jackets into only 3,090 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $101,900, but the jackets can then be sold for their regular price of $44.00 each. Required: 1. Calculate the incremental income. Alternative 1 Sell to a second- hand shop Alternative 2 Disassemble and sell to a recycler Alternative 3 Rework and sell at regular prices Incremental revenue Incremental costs Incremental income 0 $

Answer 1

Comput aton of the ineremendal encome ALfennative 4 Sell toa second Disassembland Rewoak and sell hand shopell toe neeyclex al eular pries Alerricl ve &Alernadeve 3 facremental Revene Incemenial tos Incremental income RO 565AO 135960 33200 101900 120 184340 34060 ALleanadeve The comany should choose Explareles ALlerralive 540 00) Allerraleve 540 x14.00) fneremendel cest ToCremendel AHennadeve 33010 x 44. 00) Tocriemental cost fneremetal .41120 565HO 32,200 CQS cncome $a340 P13960 iol 100 34060 cncome erecs

The one welh he highes cnutemendal encome AlHernatve choose So the company ehould Ahe Adexnadleve. .