Question 6(of 10) value: 1.00 points Signal mistakenly produced 1,425 defective

Question

Question 6(of 10) value: 1.00 points Signal mistakenly produced 1,425 defective cell phones. The phones cost $68 each to produce. A salvage company will buy the defective phones as they are for $34 each. It would cost Signal $86 per phone to rework the phones. If the phones are reworked, Signal could sell them for $146 each. Assume there is no opportunity cost associated with reworking the phones. Compute the incremental net income from reworking the phones. Scrap Sales Rework costs Total esc 20 F3

Explanation / Answer

1) Scrap Rework Number of cell phones 1425 1425 Sales per unit 34 146 rework cost 86 Net Income 34 60 Total incremental income 48450 85500 By reqorking the cell phones there will be an additional income of ( 85500 - 48450)      = 37050 2) Sell as is Process further Incremental amount Number of units 1650 1650 Sales 97500 775500 678000 Additional processing cost 470250 470250 Income/(Loss) 97500 305250 207750 The company should process further as the incremental income is 207750 3) Product X Product Y Number of units produced per hour 2 3 Contribution margin 5 4 Contribution margin per production hour 10 12 ( number of units per hour * contribution per unit)

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