Hip Manufacturing produces denim clothing. This year it produced 3,400 denim jackets at a cost of $102,000. These jackets were damaged in the warehouse during storage. Management identified three alternatives for these jackets. 1. Jackets can be sold as scrap to a secondhand clothing shop for $20,400. 2. Jackets can be disassembled at a cost of $6,800 and sold to a recycler for $40,800. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $115,600, and the jackets can then be sold for $153,000. Required: (1) Compute the income for each alternative. (2) Which alternative should be chosen? Scrap, Recycle or Rework Analysis Revenue from scrap/recycle/rework Cost of recycled/reworked units Income $ $ Scrap Rework 20,400 $ (102,000) (81,600) $ Recycle 40,800 $ (108,800) (68,000) $ Rework 153.000 (217,600) (64,600)
Hip Manufacturing produces denim clothing. This year it produced 3,400 denim jackets at a cost of $102,000. These jackets were damaged in the warehouse during storage. Management identified three alternatives for these jackets. 1. Jackets can be sold as scrap to a secondhand clothing shop for $20,400. 2. Jackets can be disassembled at a cost of $6,800 and sold to a recycler for $40,800. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $115,600, and the jackets can then be sold for $153,000. Required: (1) Compute the income for each alternative. (2) Which alternative should be chosen? Scrap, Recycle or Rework Analysis Revenue from scrap/recycle/rework Cost of recycled/reworked units Income $ $ Scrap Rework 20,400 $ (102,000) (81,600) $ Recycle 40,800 $ (108,800) (68,000) $ Rework 153.000 (217,600) (64,600)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Hip Manufacturing produces denim clothing. This year it produced 3,400 denim jackets at a cost of $102,000. These jackets were
damaged in the warehouse during storage. Management identified three alternatives for these jackets.
.
1. Jackets can be sold as scrap to a secondhand clothing shop for $20,400.
2. Jackets can be disassembled at a cost of $6,800 and sold to a recycler for $40,800.
3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $115,600, and the jackets can
then be sold for $153,000.
Required:
(1) Compute the income for each alternative.
(2) Which alternative should be chosen?
Scrap, Recycle or Rework Analysis
Revenue from scrap/recycle/rework
Cost of recycled/reworked units
Income
$
$
Scrap
Rework
20,400 $
(102,000)
(81,600) $
Recycle
40,800 $
(108,800)
(68,000) $
Rework
153,000
(217,600)
(64,600)
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