Question

# Hanno Corp manufactures holiday wrapping paper. The print design had a typo and instead of saying...

Hanno Corp manufactures holiday wrapping paper. The print design had a typo and instead of saying "Merry Xmas" the wrap says "Merry YMas" and Hanno ends up wth 2,000 rolls of defective wrapping paper at a typical cost of \$2.00 per roll. The rolls can be sold as is for \$3,000 or re-run to correct the Y to an X at a cost of \$2,800 and sold for the normal selling price of \$4,000. The incremental advantage/disadvantge to the re-run is:

Incremental Advantage / Disadvantage of Re-run = Profit/Loss of Re-run - Profit/Loss of Original Run

Profit / Loss of Re-run = Revenue - Cost of re-run

= 4,000 - 2,800

= 1,200

Hence, Profit of \$1,200 on re-run.

Profit / Loss of Original Run = Revenue - Cost

= 3,000 - (2,000*2)

= 3,000 - 4,000

= -1,000

Hence, Loss of \$1,000 originally.

= \$2,200

Hence, the incremental advantage of re-run is \$2,200

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