A company must decide between scrapping or reworking units that do not pass insp

Question

A company must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that cost $610 per unit to manufacture. The units can be sold as is for $2.70 each, or they can be reworked for $470 each and then sold for the full price of $8.80 each. If the units are sold as is, the company will be able to build 13,000 replacement units at a cost of $6.10 each, and sell them at the full price of $8.80 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 Cost to rework units pportunity cost of not making new units s of reworked units Sales of scrap units Incremental income (oss) The company should as is

Explanation / Answer

Sale as Rework Scrap Sales of scrap units 35100 Sales of reworked units 114400 cost to rework units -61100 opportunity cost of not making new units -35,100 Incremental income (loss) 35100 18200 the company should Sell as is

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