A company has the choice of either selling 600 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $2.00 per unit. Alternatively, it could rebuild them with incremental costs of $0.60 per unit for materials, $1.00 per unit for labor, and $0.80 per unit for overhead, and then sell the rebuilt units for $5.00 each. What is the amount of incremental cost from rebuilding?

Question

contestada

Respuesta :

Dryomys Dryomys · Answer 1 · 2019-08-19T07:59:43+02:00

Answer: Amount of incremental cost from rebuilding = $2.40 per unit.

Explanation:

Given that,

Company has two choices:

Either selling 600 defective units as scrap or rebuilding them

Company could sell the defective units as they are for $2.00 per unit

Incremental costs of rebuilding them:

Materials cost = $0.60 per unit

Overhead cost = $0.80 per unit

Labor cost = $1.00 per unit

Therefore,

Amount of incremental cost from rebuilding = Materials cost + Overhead cost + Labor cost

= 0.60 + 0.80 + 1.00

= $2.40 per unit