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mr Goodwill [35]
3 years ago
11

Signal mistakenly produced 1,075 defective cell phones. The phones cost $70 each to produce. A salvage company will buy the defe

ctive phones as they are for $39 each. It would cost Signal $82 per phone to rework the phones. If the phones are reworked, Signal could sell them for $146 each. Signal has excess capacity. Should Signal scrap or rework the phones
Business
1 answer:
kow [346]3 years ago
5 0

Answer: Rework the phones

Explanation:

The phones have already been produced so the cost price of $70 does not matter as it is a sunk cost.

The decision the company makes between scrap and reworking will depend on which option bring in more money.

Scrap = $39

Reworking:

= Price after reworking - Cost to rework

= 146 - 82

= $64

Incremental income of reworking over scrap:

= 1,075 * (64 - 39)

= $‭26,875‬

<em>Signal makes an incremental income of $‭26,875‬ if they rework the phones so they should do that. </em>

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vekshin1

Answer:

b. $660,000.

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Years ago in the overnight delivery business, providing package tracking capability gave some firms a competitive advantage. Now
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When a company gains a competitive advantage over an action that becomes mandatory in the line of business, such as providing package tracking capability, this is an example of profitability factors becoming productivity factors over time.

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Answer:

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