Harold Manufacturing produces denim clothing. This year, it produced 5,260 denim

Question

Harold Manufacturing produces denim clothing. This year, it produced 5,260 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 second-hand clothing shop for $8.00 each 2. Jackets can be disassembled at a cost of $31,800 and sold to a recycler for $12.00 each. 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 5,260 jackets into only 3,050 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $102,200, but the ackets can then be sold for their regular price of $45.00 each. Required: 1. Calculate the incremental income Alternative 1 Sell to a second- hand shop Alternative 2 Disassemble andRework and sell at sell to a recycler Alternative 3 regular prices Incremental revenue Incremental costs Incremental income

Explanation / Answer

Calculate incremental income :

Alternative 1 sell to a second hand shop Alternative 2 Disassemble and sell to a recycler Alternative 3 Rework andd sell at regular prices Incremental revenue 42080 63120 137250 Incremental costs (31800) (102200) Incremental income 42080 31320 35050 The company shoud denim jackets sell to a second hand shop

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