Please clearly break down this question for me using an excel sheet if possible.
ID: 2491455 • Letter: P
Question
Please clearly break down this question for me using an excel sheet if possible. I would like to see how to work this problem for future reference, thank you so much in advance! :)
*Harold Manufacturing produces denim clothing. This year, it produced 5,300 denim jackets at a manufacturing cost of $41.00 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets.
Please clearly break down this question for me using an excel sheet if possible. I would like to see how to work this problem for future reference, thank you so much in advance! :)
*Harold Manufacturing produces denim clothing. This year, it produced 5,300 denim jackets at a manufacturing cost of $41.00 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets.
Harold Manufacturing produces denim clothing. This year, it produced 5,300 denim jackets at a manufacturing cost of $41.00 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 to a second-hand clothing shop for $8.00 each. 2. Jackets can be disassembled at a cost of $32,600 and sold to a recycler for $12.00 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 5,300 jackets into only 3,080 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $101,100, but the ackets can then be sold for their regular price of $45.00 each. Required: 1. Calculate the incremental income. Alternative 1 Sell to a second- hand shop Alternative 2 Disassemble and sell to a recycler Alternative 3 Rework and sell at regular prices Incremental revenue Incremental costs Incremental incomeExplanation / Answer
OPTION 1 REVENUE WILL BE $5300 * 8 = 42400 LESS COST WILL BE NIL SO INCREMENTAL INCOME WILL BE $42400.
OPTION 2 INCREMENTAL REVENUE WILL BE 5300 * 12 = 63600 LESS INCREMENTAL COST 32600
INCREMENTAL INCOME = 63600 - 32600 = $31000.
OPTION 3 INCREMENTAL REVENUE 3080 * 45 = 138600 LESS INCREMENTAL COST 101100
INCREMENTAL INCOME WILL BE = 138600 - 101100 = $37500.
HENCE WE CAN SEE THAT THE INCREMENTAL INCOME IS MAXIMUM IN CASE OF OPTION 1 THE COMPANY SHOULD GO AHEAD WITH OPTION 1.