Tori Inc. has some material that originally cost $68,400. The material has a scrap value of $30,100 'as is', but if reworked at a cost of $1,400, it could be sold for $30,800. What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it 'as is' as scrap? (CIMA adapted)
A) $(69,100)
B) $(700)
C) $29,400
D) $(39,000)

Question

Quizplus · Accepted Answer

The incremental effect is calculated by comparing the additional revenue from reworking the material to the additional cost. Reworking costs $1,400 and increases the sale value from $30,100 to $30,800, resulting in an incremental profit of $700 ($30,800 - $30,100 - $1,400).

Tori Inc Has Some Material That Originally Cost $68,400