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? they should sell it as scrap, because by reworking and then selling it, they will lose $5, 900

Answer 1

Answer:

It is more convenient to rework.

Explanation:

Giving the following information:

Wenig Inc. has some material that originally cost $73,500. The material has a scrap value of $45,600 as is, but if reworked for $6,600, it could be sold for $58,100.

We need to calculate the effect on income of the two options:

Sell now:

Income= 45,600 - 73,500= -$27,900

Rework:

Income= 58,100 - 6,600 - 73,500= -$22,000

It is more convenient to rework.