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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

REWORK: ...

$2.19