Problem 10-4A Sell or process LO A1 These jackets were damacetninghis year it pr

Question

Problem 10-4A Sell or process LO A1 These jackets were damacetninghis year it produced 5290 denim jackets at a manufacturing cost of $4100 each for these jackets in the warehouse during storage Management investigated the matter and identifiled three aternatives L Jackets can be sold to a secondhand clo shop for $700 eoch 2 Jackets can be disessembied at a cost of $32.800 and sold to s recycier for $1200 each 3. Jackets can be reworked and turned into good jackets. However with the damage, management es essemble the good parts of the 5.290 eckets into only 3,04 tineres it wity eble to Ojackets The remaining pieces offabric wif be discarded The cost of reworking the jeckets w be 5102700 but the jackets con then b e soid for their regular price of $4400 each Required: Alternative1 Alternative Allernatve Sell to a second hand shop Disassembie andRework and sell at sell to a recyeler prices revende costs nerementatincome

Explanation / Answer

**Manufacturing cost of units is a sunk cost (cost incurred in past )thus irrelevant

**Alternative 1 is best as it provides incremenetal income of 37030 which is highest among all.

Alternative 1 ALternative 2 Alternative3 Incremental revenue 5290*7=37030 5290*12=63480 3040*44=133760 Incremental cost 0 (32800) (102700) Incremental income 37030 30680 31060

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