Respuesta :
Answer:
Incremental income is $44,000
Explanation:
The incremental income of reworking as against the selling off as scrapped units is computed below.It is important that by not selling off the defective units as scrap,the sales revenue that could have been derived from scrap sale is lost,hence it is an opportunity cost that should be deducted from sales revenue recorded under the new arrangement.
Sales price of rework $8.50
less:opportunity cost of rework ($2)
incremental sales price $6.50
incremental sales revenue($6.5*22,000) $143,000
incremental cost of rework($4.5*22,000) ($99,000)
incremental net income $44,000
No doubt that the incremental net income of reworking the defective units is $44,000 over and above what is realizable if the defective were scrapped
