Web Chapter 24 - Capital Budgeting and Managerial Decisions...

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Capital Budgeting and   Capital Budgeting and   Managerial Decisions Managerial Decisions Chapter 25, Section 2 Chapter 25, Section 2 NOTE: Focus on pages 1008 - 1015 NOTE: Focus on pages 1008 - 1015
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Scrap or Rework A company has the choice of either selling 1,000  defective units as scrap or rebuilding them.  The  company could sell the defective units as they are  for $4.00 per unit. Alternatively, it could rebuild  them with incremental costs of $1.00 per unit for  materials, $2.00 per unit for labor, and $1.50 per  unit for overhead, and then sell the rebuilt units for  $8.00 each.   What should the company do? 
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Scrap or Rework Scrap Rework Revenue $4,000 $8,000 Less costs Direct materials 1,000 Direct labor 2,000 Overhead 1,500 Net income $4,000 $3,500
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Accepting Additional Business Air Ball Sporting Goods, Inc manufactures basketballs for large  retailers and is at 90% of plant capacity Cost of goods sold includes fixed costs of $1,080,000 while 
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Web Chapter 24 - Capital Budgeting and Managerial Decisions...

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