Question

Chap 23 Homework A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that cost $6.10 per unit to manufacture. The units can be a) sold as is for $2.50 each, or b) reworked for $4.90 each and then sold for the full price of $8.60 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.) 25 points Sale as Scrap Rework Skipped Book Incremental income doss) S 0 S 0 Pent The company should Reforences

Answer 1

solution: Rework Sale as Scrap 32,500 Sales of scrap units (13000*2.5) Sales of reworked units (13000*8.60) Cost to rework units (13000*4.9) Incremental income (loss) 111,800 - 63,700 48,100 32,500 The company should Rework