Question

Milltronics Industries has 2,900 defective units of product that have already cost $14.90 each to produce. A salvage company will purchase the defective units as they are for $5.90 each. Milltronics ‘s production manager reports that the defects can be corrected for $5.10 per unit, enabling them to be sold at their regular market price of $22.80. The incremental income or loss on reworking the units is:

Answer 1

Answer:

Incremental income is $34,220.00  

Explanation:

                                                                                             Amount in $

Number of defective units (a)                                               2,900.00  

Cost of production per unit (b)                                               14.90  

Total cost of production (c = a x b)                                       43,210.00  

Proceed from sale of defective product per unit (d)               5.90  

Sale of defective product (e = d x a)                                       17,110.00  

Additional cost for correction of defect (f)                               5.10  

Cost for correction of defect (g = f x a)                               14,790.00  

Selling price per unit after correction of defect (h)               22.80  

Sales after correction of defect (i = h x a)                               66,120.00  

Incremental Income from sale (j = i - g - e)                               34,220.00