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# Glove, Inc. manufactures baseball gloves that normally sell for \$55 each. The firm currently has 400 defective gloves each of which cost the company \$35 in materials, labor, and overhead. The defective gloves can be sold as is at a reduced price of \$18 per glove. Alternatively, the gloves can be completely repaired at a cost of \$25 per glove and sold at the regular price of \$55. What would be the incremental effect on the company overall profit of repairing and selling the glove the regular price rather than selling them as defective gloves?

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

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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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