Garcia Company has 10,400 units of its product that were produced at a cost of $156,000. The units were damaged in a rainstor 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: Scrap Rework.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
< Prev
0
F5
6
5 of 11
tv
#
&
LK
7
Next >
ON
F7
DII
8
1
FB
(
9
F9
F G H J K
Transcribed Image Text: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 < Prev 0 F5 6 5 of 11 tv # & LK 7 Next > ON F7 DII 8 1 FB ( 9 F9 F G H J K
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