Question

Wenig Inc. has some material that originally cost $73,500. The material has a scrap value of $45,600 as is, but if reworked at a cost of $6,600, it could be sold for $58,100. What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as is as scrap? decrease of $22,000 decrease of $67,600 increase of $51,500 increase of $5,900

Answer 1

Answer:

It gives the increment of $5,900.

Explanation:

For computing the increment effect, the following things is need to be considered.

1. Incremental sales of reworking cost = Sales price - rework cost

                                                                = $58,100 - $6,600

                                                                = $51,500

2. Scrap value = $45,600

As in the give question, the incremental value is computed based on reworking rather than scrap value. So, the scrap value amount is to be deducted from the incremental sales of reworking cost.

The amount is equals to

= $55,100 - $45,600

= $5,900

Thus, it gives the increment of $5,900.