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28 July, 19:10

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:

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  1. 28 July, 22:36
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    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
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