1
a. 7000 increase
b. 5600 increase
c. 2200 increase
d. 3400 decrease
e. none of the above

1 Answer

2

Answer:

Glove, Inc.

The incremental effect on the company's overall profit of repairing and selling the glove at the regular price rather than selling them as defective gloves is:

e. none of the above

Explanation:

a) Data and Calculations:

Normal price of gloves = $55 each

Defective gloves = 400

Cost price of defective gloves = $35

Total cost of defective gloves = $14,000

Revenue from gloves sold as defective = $7,200 ($18 * 400)

Loss from sale of defective = $6,800 ($14,000 - 7,200)

Cost of repairing defective gloves = $25 each

Total cost plus repair = $60 ($35 + $25) * 400) = $24,000

Revenue from repaired gloves = $22,000 ($55 * 400)

Loss from sale of repaired gloves = $2,000 ($24,000 - $22,000)

Incremental effect on profit of repairing and selling the glove at the regular price rather than selling them as defective gloves is $4,800 decrease of the loss from $6,800 to $2,000.

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Alvah Abbott
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answered 6 months ago