Farrow Co, expects to sell 500,000 units of its product in the next period with the following results. $ 7,500,000 Sales (500,000 units) Costs and expenses Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses Net income 1,000,000 2,000,000 500,000 750,000 1,285,000 5,535,000 $1,965,000 The company has an opportunity to sell 50,000 additional units at $12 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit would be the same for the additional units as they are for the regular units. However, the additional volume would create the following incremental costs: (1) total overhead would increase by 16% and (2) administrative expenses would increase by $215,000. Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $12 per unit Normal Volume $ 2,668,3201 Additional Volume Combined Total 2,668,320 ElSales Costs and expenses Dirert labor Normal Volume Additional Volume Combined Total 2,668,320 2,668,320 Sales Costs and expenses: Direct labor Overhead + o Total costs and expenses Incremental income (loss) from new business $ 2,668,320 S 0 2 ,668,320 YYYYYYYYYTWW Exercise 23-6 Scrap or rework LO A1 A company must decide between scrapping or reworking units that do not pass inspection. The company has 19,000 defective units that cost $6.10 per unit to manufacture. The units can be sold as is for $2.90 each, or they can be reworked for $4.70 each and then sold for the full price of $9.00 each. If the units are sold as is, the company will be able to build 19,000 replacement units at a cost of $6.10 each, and sell them at the full price of $9.00 each What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.) Sale as Scrap Rework Incremental income (loss) The company should