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