The decision to rework a defective branch of products will improve net income whenever the incremental revenue earned as a result of the decision exceeds:
A) The variable costs of reworking the batch.
B) The incremental cost of reworking the batch.
C) The average cost per unit associated with reworking the batch.
D) The cash expenditure to rework the batch.

Question

Quizplus · Accepted Answer

The decision to rework a defective batch of products will only improve net income if the incremental revenue earned exceeds the incremental cost of reworking the batch. Therefore, option B, which states "The incremental cost of reworking the batch" is the correct choice. Options A, C, and D are incorrect because they do not take into account the incremental cost of reworking the batch.

The Decision to Rework a Defective Branch of Products Will