Fone Zone Corporation manufactures telephones. Recently, the company produced a batch of 570 defective telephones at...
Fone Zone Corporation manufactures telephones. Recently, the company produced a batch of 570 defective telephones at a cost of $8,700. Fone Zone can sell these telephones as scrap for $10 each. It can also rework the entire batch at a cost of $6,200, after which the telephones could be sold for $21 per unit.
If Fone Zone reworks the defective telephones, by how much will its operating income change?
Multiple Choice
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Increase by $5,770
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Increase by $6,270
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Decrease by $2,930
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Decrease by $5,770
Homework Answers
| Operating income changes | ||||
| increase in operating income = sale -cost | ||||
| cost = 6200 | ||||
| sale = 570*21 = 11970 | ||||
| Increase in operating income = 11970-6200 | ||||
| increase in operating income = 5770 | ||||
| Option " increase by $5770" is Correct |
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