500 shirts are sold as seconds at $12 per shirt.Cost of spoiled shirts is $500,000.Cost of shirts at inspection point equals $9,500,000.Calculate the net cost of the spoilage.

Question

Quizplus · Accepted Answer

The total cost of selling 500 shirts as seconds is $12 x 500 = $6,000.

Therefore, the net cost of spoilage is:

Net cost = Cost of shirts at inspection point - Cost of spoiled shirts - Revenue from selling seconds
Net cost = $9,500,000 - $500,000 - $6,000
Net cost = $9,494,000

Therefore, the answer is option B) $494,000, as it represents the net cost of the spoilage.

500 Shirts Are Sold as Seconds at $12 Per Shirt