Marco mistakenly made 1,275 defective bikes. The bikes cost $61
each to make. A salvage company decided to purchase the defective
bikes as is for $32 each. It would cost Marco $84 per bike to
rework the bikes. If Marco rework the bikes, he could sell them for
$146 each. No opportunity cost is associated with reworking the
bikes. What is the incremental net income from reworking the
bikes.
Homework Answers
| Scrap | Rework | |
|---|---|---|
| Sales | (1275*32) = 40,800 | (1275*146) = 186,150 |
| Rework cost | (1275*84) = 107,100 | |
| Total | 40,800 | 79,050 |
| Incremental revenue | 38,250 |
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