Explore BrainMass

Cameron Company incremental income from reworking

The Cameron Company must decide between scrapping or reworking units that do not pass inspection. The company has 8,700 defective units that cost $14 per unit to manufacture. The defective units can be sold as is for $3.25 each, or they can be reworked for $5.25 each and then sold for the full price of $21. If the units are sold as is, the company will have to build 8,700 replacement units at $14 each, and sell them at the full price of $21.

What is the incremental income from reworking and selling the units?

A. $76,125
B. $60,900
C. $182,700
D. $45,675

Solution Preview

Strategy: Compare incremental revenue to incremental cost