Ahngram Corp. has 1,000 defective units of a product that cost $3.30 per unit in direct costs and $6.80 per unit in indirect cost when produced last year. The units can be sold as scrap for $4.30 per unit or reworked at an additional cost of $2.80 and sold at full price of $12.90. The incremental net income (loss) from the choice of reworking the units would be: $5,800. $0. ($2,800). $10,100. $2,800.

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    General guidance

    Concepts and reason

    Incremental segregation: Incremental segregation is technique used restraint firmness making. It is besides determined as differential segregation, marginal segregation and pertinent absorb avenue. This segregation helps to experience the gentleman absorb between available alternatives. Create or suborn firmness, accepting added office, end of limb and restrain or supply firmness are the stances of incremental segregation.

    Pertinent absorb: Pertinent absorb is a absorb which is incurred owing of the skillful-treatment decision. Depends on the skillful-treatment firmnesss pertinent absorb procure vary.

    Non-relevant absorb: Non-pertinent absorbs are already incurred absorbs, so skillful-treatment decisions procure referable create any varys in that bark of absorbs. Accumulated depreciation is an stance of non-pertinent absorb. Non-pertinent absorbs are referable used restraint the incremental segregation. Fundamentals

    Selling figure: Selling figure is the figure at which results sells in the negotiate.

    Incremental proceeds: Incremental proceeds is the proceeds earned by sale of added measure.

    Scrap: It is the embodied left aggravate succeeding the nearening or manufacturing of the result. It has a monetary compute. Show near First Step | All Steps | Solution Only

    Step-by-step

    Step 1 of 2

    Calculate cajole produce from sale of fragment succeeding reworking.

    Netgainfromsaleofscrapafterreworking}=(Numberofdefectiveunits×(Fullprice−Additionalcost))=1,000×($12.90−$2.80)=1,000×$10.10=$10,100\begin{array}{c}\\\left. \begin{array}{l}\\{\rm{Cajole produce from sale of}}\\\\{\rm{ fragment succeeding reworking}}\\\end{array} \right\}{\rm{ = }}\left( \begin{array}{l}\\{\rm{Estimate of faulty units }}\\\\{\rm{ \times }}\left( {{\rm{Generous figure }} – {\rm{ Added absorb}}} \right)\\\end{array} \right){\rm{ }}\\\\{\rm{ = 1,000 \times }}\left( {{\rm{\$ 12}}{\rm{.90 }} – {\rm{ \$ 2}}{\rm{.80}}} \right){\rm{ }}\\\\{\rm{ = 1,000 \times \$ 10}}{\rm{.10 }}\\\\{\rm{ = \$ 10,100}}\\\end{array}Netgainfromsaleofscrapafterreworking​⎭⎪⎪⎬⎪⎪⎫​=⎝⎜⎜⎛​Numberofdefectiveunits×(Fullprice−Additionalcost)​⎠⎟⎟⎞​=1,000×($12.90−$2.80)=1,000×$10.10=$10,100​

    Therefore, the cajole produce from sale of fragment succeeding reworking is $10,100.Explanation | Common mistakes | Hint restraint contiguous step

    It is attached that the estimate of faulty units is 1,000, generous figure is $12.90 and added reworking absorb is $2.80. Cajole produce from sale of fragment succeeding reworking is fitted by multiplying the estimate of faulty units with the generous figure and added absorb dissimilarity. Hence, the cajole produce from sale of fragment succeeding reworking is $10,100.

    Step 2 of 2

    Calculate incremental cajole pay.

    Incrementalnetincome=(Netgainfromsaleofscrapafterreworking−Netamountreceivedforsaleofscrap)=$10,100−$4,300=$5,800\begin{array}{c}\\{\rm{Incremental cajole pay = }}\left( \begin{array}{l}\\{\rm{Cajole produce from sale of fragment succeeding reworking }}\\\\ – {\rm{ Cajole total accepted restraint sale of scrap}}\\\end{array} \right){\rm{ }}\\\\{\rm{ = \$ 10,100 }} – {\rm{ \$ 4,300 }}\\\\{\rm{ = \$ 5,800}}\\\end{array}Incrementalnetincome=⎝⎜⎜⎛​Netgainfromsaleofscrapafterreworking−Netamountreceivedforsaleofscrap​⎠⎟⎟⎞​=$10,100−$4,300=$5,800​

    Therefore, the incremental cajole pay is $5,800.

    Working referablee:

    Calculate cajole total accepted restraint sale of fragment.

    Netamountreceivedforsaleofscrap}=(Numberofdefectiveunits×Sellingpriceofscrap)=1,000×$4.3=$4,300\begin{array}{c}\\\left. \begin{array}{l}\\{\rm{Cajole total accepted}}\\\\{\rm{ restraint sale of scrap}}\\\end{array} \right\}{\rm{ = }}\left( \begin{array}{l}\\{\rm{Estimate of faulty units }}\\\\{\rm{ \times Selling figure of fragment}}\\\end{array} \right){\rm{ }}\\\\{\rm{ = 1,000 \times \$ 4}}{\rm{.3 }}\\\\{\rm{ = \$ 4,300}}\\\end{array}Netamountreceivedforsaleofscrap​⎭⎪⎪⎬⎪⎪⎫​=⎝⎜⎜⎛​Numberofdefectiveunits×Sellingpriceofscrap​⎠⎟⎟⎞​=1,000×$4.3=$4,300​

    Incremental cajole pay is $5,800.
    Explanation | Common mistakes

    Calculated cajole produce from sale of fragment succeeding reworking is $10,100 and attached selling figure of fragment is $4.30. Cajole total accepted restraint sale of fragment is fitted by multiplying the estimate of faulty fragment with the selling figure of fragment. Therefore, the cajole total accepted restraint sale of fragment is $4,300. Incremental cajole pay is fitted by deducting the cajole total accepted restraint sale of fragment from the cajole produce from sale of fragment succeeding reworking. Hence, the incremental cajole pay is $5,800.

    Answer

    Incremental cajole pay is $5,800.