Question

Donardo Inc. has some material that originally cost $68,400. The material has a scrap value of $30,100 as is, but if reworked at a cost of $1,400, it could be sold for $30,800. 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?

Answer 1

Answer:

Explanation:

For computing the incremental effect on the company's overall profit between reworking and selling the material rather than selling it as is as scrap, we have to do the comparison between these two.

The calculation is shown below:

= Scrap value of material - rework sale value

= $30,100 - $30,800

= - $700

The other items which are shown in the question are irrelevant for comparison. Thus, it is ignored.

Hence, the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as is as scrap is show a loss of $700