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

Incremental income is $34,220.00

Step-by-step 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