Problem 23-2A (Algo) Scrap or rework LO P2 Hip Manufacturing produces denim clothing. This year it produced 3,320 denim jackets at a cost of $99,600. These jackets were damaged in the warehouse during storage. Management identified three alternatives for these jackets. 1. Jackets can be sold as scrap to a secondhand clothing shop for $19,920. 2. Jackets can be disassembled at a cost of $6,640 and sold to a recycler for $39,840. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $112,880, and the jackets can then be sold for $149,400. Required: (1) Compute the income for each alternative. (2) Which alternative should be chosen? Scrap, Recycle or Rework Analysis Revenue from scrap/recycle/rework Cost of recycled/reworked units Income Scrap Recycle Rework $ ° $ 0 $

Cornerstones of Cost Management (Cornerstones Series)
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Author:Don R. Hansen, Maryanne M. Mowen
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Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 19E: Walloon Company produced 150 defective units last month at a unit manufacturing cost of 30. The...
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Problem 23-2A (Algo) Scrap or rework LO P2
Hip Manufacturing produces denim clothing. This year it produced 3,320 denim jackets at a cost of $99,600. These jackets were
damaged in the warehouse during storage. Management identified three alternatives for these jackets.
1. Jackets can be sold as scrap to a secondhand clothing shop for $19,920.
2. Jackets can be disassembled at a cost of $6,640 and sold to a recycler for $39,840.
3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $112,880, and the jackets can
then be sold for $149,400.
Required:
(1) Compute the income for each alternative.
(2) Which alternative should be chosen?
Scrap, Recycle or Rework Analysis
Revenue from scrap/recycle/rework
Cost of recycled/reworked units
Income
Scrap
Recycle
Rework
$
°
$
0 $
Transcribed Image Text:Problem 23-2A (Algo) Scrap or rework LO P2 Hip Manufacturing produces denim clothing. This year it produced 3,320 denim jackets at a cost of $99,600. These jackets were damaged in the warehouse during storage. Management identified three alternatives for these jackets. 1. Jackets can be sold as scrap to a secondhand clothing shop for $19,920. 2. Jackets can be disassembled at a cost of $6,640 and sold to a recycler for $39,840. 3. Jackets can be reworked and turned into good jackets. The cost of reworking the jackets will be $112,880, and the jackets can then be sold for $149,400. Required: (1) Compute the income for each alternative. (2) Which alternative should be chosen? Scrap, Recycle or Rework Analysis Revenue from scrap/recycle/rework Cost of recycled/reworked units Income Scrap Recycle Rework $ ° $ 0 $
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