Chang Industries Has 2,000 Defective Units of Product That Have

question 107

Multiple Choice

Chang Industries has 2,000 defective units of product that have already cost $14 each to produce. A salvage company will purchase the defective units as they are for $5 each. Chang's production manager reports that the defects can be corrected for $6 per unit, enabling them to be sold at their regular market price of $21. The incremental income or loss on reworking the units is:

• A) $20,000 loss.
• B) $20,000 income.
• C) $12,000 loss.
• D) $32,000 income.
• E) $30,000 income.

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Definitions:

Cash Collection

The process of receiving and processing payments from customers, including cash, checks, and credit card payments.

Expense Accounts

Financial accounts used to track money spent or costs incurred in a company's operations.

Credits

Entries in accounting that increase liabilities, revenue, or equity accounts, or decrease asset or expense accounts.

Withdrawals

Money or assets taken out of a business by its owner(s) for personal use.