Harold Manufacturing produces denim clothing. This year, it produced 5,190 denim
ID: 2529771 • Letter: H
Question
Harold Manufacturing produces denim clothing. This year, it produced 5,190 denim jackets at a manufacturing cost of $41.00 each These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets. 1. Jackets can be sold to a secondhand clothing shop for $8.00 each. 2. Jackets can be disassembled at a cost of $31,200 and sold to a recycler for $11.00 each. 3. Jackets can be reworked and turned into good jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,190 jackets into only 3,070 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $102,900, but the jackets can then be sold for their regular price of $45.00 each Required 1. Calculate the incremental income. Alternative 1 Alternative 2 Sell to a second Disassemble and Rework and sell at Alternative 3 hand shop s sell to a recycler regular prices Incremental revenue Incremental costs Incremental incomeExplanation / Answer
Answers
Alt 1: Second hand sale
Alt 2: Sell to recycler
Alt 3: Rework and sell
Incremental Revenue
$ 41,520.00 [5190 jackets x $8]
$ 57,090.00 [5190 jackets x $11]
$ 1,38,150.00 [3070 jackets x $45]
Incremental Costs
$ 31,200.00
$ 1,02,900.00
Incremental Income
$ 41,520.00
$ 25,890.00
$ 35,250.00
* Alternative 1 is the best alternative
Alt 1: Second hand sale
Alt 2: Sell to recycler
Alt 3: Rework and sell
Incremental Revenue
$ 41,520.00 [5190 jackets x $8]
$ 57,090.00 [5190 jackets x $11]
$ 1,38,150.00 [3070 jackets x $45]
Incremental Costs
$ 31,200.00
$ 1,02,900.00
Incremental Income
$ 41,520.00
$ 25,890.00
$ 35,250.00
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