Question

Ahngram Corp. has 1,000 defective units of a product that cost $3 per unit in direct costs and $6.50 per unit in indirect cost when produced last year. The units can be sold as scrap for $4 per unit or reworked at an additional cost of $2.50 and sold at full price of $12. The incremental net income (loss) from the choice of reworking the units would be:

Answer 1

Incremental income = $ 5,500

Working

	Sell as it is	Sell after rework	Incremental income
Incremental Revenue	$            4,000.00	$          12,000.00	$            8,000.00
Incremental Costs		$          (2,500.00)	$          (2,500.00)
Incremental Income	$            4,000.00	$            9,500.00	$            5,500.00