Degner Inc. has some material that originally cost $19,500. The material has a scrap value of $13,300 as is, but if reworked at a cost of $2,100, it could be sold for $14,000. 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?
A) -$20,900
B) $11,900
C) -$7,600
D) -$1,400

Question

Quizplus · Accepted Answer

The incremental effect on profit is calculated by comparing the net gain from reworking and selling the material versus selling it as scrap. Reworking costs $2,100 and selling for $14,000 results in a net of $11,900. Selling as scrap gives $13,300. The difference is $11,900 - $13,300 = -$1,400.