ooge Enterprises manufactures ceiling fans that normally sel

ooge Enterprises manufactures ceiling fans that normally sell for $ 90 each. There are 340 defective fans in? inventory, which cost $ 55 each to manufacture. These defective units can be sold as is for $ 22 ?each, or they can be processed further for a cost of $ 42 each and then sold for the normal selling price. Stooge Enterprises would be better off by a A. $ 8 comma 840 net increase in operating income if the ceiling fans are sold as is. B. $ 8 comma 840 net increase in operating income if the ceiling fans are repaired. C. $ 23 comma 120 net increase in operating income if the ceiling fans are repaired. D. $ 23 comma 120 net increase in operating income if the ceiling fans are sold as is.

Solution

Option B is correct i.e $ 8840 net increase in operating income if the ceiling fans are repaired.

Incremental sales value if ceiling fans are repaired (90 – 22) * 340

23120

(-) Incremental repair cost (42 * 340)

14280

Net increase in operating income if the ceiling fans are repaired

8840