Question

Maps Translate News e Chrome Web Store wc MyEagles Personeext Houston Communitwe 5.1 Simple Interest.. Help Se Harold Manufacturing produces denim clothing. This year, it produced 5,100 denim jackets at a manufacturing cost of $42.00 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets 1. Jackets can be sold as is to a secondhand clothing shop for $8.00 each. 2. Jackets can be disassembled at a cost of $31,500 and sold to a recycler for $11.00 each. 3. Jackets can be reworked and turned into good Jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,100 jackets into only 2.910 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $102.700, but the jackets can then be sold for their regular price of $44.00 each Required: 1. Calculate the incremental income. Alternative 1 Sell to a secondhand shop $ 40,800 Alternative 2 Disassemble and sell to a recycler Alternative 3 Rework and sell at regular prices incremental revenue Incremental costs Incremental income $ 40,000 $ 0 0 $ Alternative 1 Prey 1 of 1 !!! Next > we to search

Answer 1

The Manufacturing Cost of 5100 Denim Jackets is a sunk cost and hence irrelevant in decision making.

Calculating Incremental Income for each alternative

Alternative 1. Sell to a secondhand shop
Particulars	Calculations	Amount ($)
Incremental Revenue	( $8 x 5100)	$40,800
Less:- Incremental Costs		$0
Incremental Incomes		$40,800
Alternative 2. Disassemble and sell to a recycler.
Particulars	Calculations	Amount ($)
Incremental Revenue	( $11 x 5100)	$56,100
Less:- Incremental Costs	Given	$31,500
Incremental Incomes		$24,600
Alternative 3. Rework and sell at regular prices.
Particulars	Calculations	Amount ($)
Incremental Revenue	( $44 x 2910)	$128,040
Less:- Incremental Costs	Given	$102,700
Incremental Incomes		$25,340

Recommendation :- The best alternative is to sell 5100 Denim jackets (damaged) to the secondhand clothing shop at $8.00 each.