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