A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 19,000 defective units that cost $5.20 per unit to manufacture. The units can be a) sold as is for $2.60 each, or b) reworked for $4.80 each and then sold for the full price of $7.80 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the unit. as scrap or rework them? (Enter costs and losses as negative values.) Incremental income (loss) The company should: Sale as Scrap $ 0 $ Rework 0
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- Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be a) sold as is for $2.00 each, or b) reworked for $4.50 each and then sold for the full price of $8.50 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.) Sale as Scrap Rework Incremental income (loss) $ 2$ The company should:A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that cost $5.70 per unit to manufacture. The units can be a) sold as is for $3.20 each, or b) reworked for $4.70 each and then sold for the full price of $8.90 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)
- A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 10,000 defective units that cost $5.30 per unit to manufacture. The units can be a) sold as is for $3.10 each, or b) reworked for $4.60 each and then sold for the full price of $8.40 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.) Incremental income (loss) The company should: Sale as Scrap ReworkA company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 10,000 defective units that cost $5.30 per unit to manufacture. The units can be a) sold as is for $3.10 each, or b) reworked for $4.60 each and then sold for the full price of $8.40 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.) Incremental income (loss) The company should: Sale as Scrap $A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that cost $6.10 per unit to manufacture. The units can be a) sold as is for $3.40 each, or b) reworked for $4.50 each and then sold for the full price of $9.50 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them?
- Road master shocks has 15000 units of a defective product on hand that costs $80,000 to manufacture. The company can either sell this product as is for scrap for $6 per unit or it can sell the product for $9 per unit after reworking the units to correct the defects at a cost of $50,000. What should the company do?Garcia Company has 10,500 units of its product that were produced at a cost of $157,500. The units were damaged in a rainstorm. Garcia can sell the units as scrap for $21,000, or it can rework the units at a cost of $39,500 and then sell them for $52,000. (a) Prepare a scrap or rework analysis of income effects. (b) Should Garcia sell the units as scrap or rework them and then sell them? (a) Scrap or Rework Analysis Scrap Rework Revenue from scrapped/reworked units Cost of reworked units Income $ 0 $ 0 Incremental income (b) The company should:A company must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $48,000 or reworked for $78,400 and then sold for $144,000. (a) Prepare a scrap or rework analysis of income effects. (b) Should the company sell the units as scrap or rework them? 4) Sempor Red Analysis Revenue from sorappedworked un Cast of reworked units Income incrementalne by The company should Rework
- Garcia Company has 10,400 units of its product that were produced at a cost of $156,000. The units were damaged in a rainstorm. Garcia can sell the units as scrap for $31,200, or it can rework the units at a cost of $49,600 and then sell them for $65,300. (a) Prepare a scrap or rework analysis of income effects. (b) Should Garcia sell the units as scrap or rework them and then sell them? (a) Scrap or Rework Analysis Revenue from scrapped/reworked units Cost of reworked units Income Incremental income (b) The company should: F1 2 W S F2 # 3 E D 80 F3 MAR 29 $ 4 Scrap (0) R a F4 % 5 Rework ON F7 DII 8 1 FB ( 9 F9 F G H J K-S Garcia Company has 10,500 units of its product that were produced at a cost of $157,500. The units were damaged in a rainstorm. Garcia can sell the units as scrap for $21,000, or it can rework the units at a cost of $39,500 and then sell them for $52,000. (a) Prepare a scrap or rework analysis of income effects. (b) Should Garcia sell the units as scrap or rework them and then sell them? (a) Scrap or Rework Analysis Revenue from scrapped/reworked units Cost of reworked units Income Incremental income (b) The company should: Scrap ReworkA company must decide between scrapping or reworking units that do not pass inspection. The company has 22000 defective units that cost $6 per unit to manufacture. The units can be sold as is for $2.00 each or they can be reworked for $4.50 each and then sold for the full price of $8.50 each. If the units are sold as is the company will be able to build 22000 replacement units at a cost of $6 each and sell them at the full price of $8.50. (1) What is the incremental income from selling the units as scrap? (2) what is the incremental income from reworking and selling the units?(3) should the company sell the units as scrap or rework them?