ahngram corp. has 1000 defective units of a product that cost two dollars per un

Question

ahngram corp. has 1000 defective units of a product that cost two dollars per unit indirect costs and $5.50 per unit indirect cost when produced last year. The unit can be sold as scrap for three dollars per unit or reworks add an additional cost of $1.50 and sold at full price of nine dollars. The incremental their income (loss) from the choice of reworking the units would be: $3000 $0 ($1,500) $7500 $1500 ahngram corp. has 1000 defective units of a product that cost two dollars per unit indirect costs and $5.50 per unit indirect cost when produced last year. The unit can be sold as scrap for three dollars per unit or reworks add an additional cost of $1.50 and sold at full price of nine dollars. The incremental their income (loss) from the choice of reworking the units would be: $3000 $0 ($1,500) $7500 $1500 ahngram corp. has 1000 defective units of a product that cost two dollars per unit indirect costs and $5.50 per unit indirect cost when produced last year. The unit can be sold as scrap for three dollars per unit or reworks add an additional cost of $1.50 and sold at full price of nine dollars. The incremental their income (loss) from the choice of reworking the units would be: $3000 $0 ($1,500) $7500 $1500

Explanation / Answer

Opportunity cost if defective units were not reworked (X)= Full price - direct cost = 9-0 = $9

Incremental net income from reworking the defective units of product = (Full price - Additional cost - X)*Total units

= (9 - 1.5 - 9) * 1000 = (-1.5)*1000 = -$1500

Incremental net income from reworking the defective units of product = ($1500)

ANSWER: Option C) ($1500)

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