A company must decide between scrapping or reworking units that do not pass Inspection. The company has 10,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $31,000 or reworked for $45,000 and then sold for $85,000. (a) Prepare a scrap or rework analysis of Income effects. (b) Should the company sell the units as scrap or rework them? (a) Scrap or Rework Analysis Revenue from scrapped/reworked units Cost of reworked units Income Incremental income (b) The company should: Scrap Rework
A company must decide between scrapping or reworking units that do not pass Inspection. The company has 10,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $31,000 or reworked for $45,000 and then sold for $85,000. (a) Prepare a scrap or rework analysis of Income effects. (b) Should the company sell the units as scrap or rework them? (a) Scrap or Rework Analysis Revenue from scrapped/reworked units Cost of reworked units Income Incremental income (b) The company should: Scrap Rework
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![A company must decide between scrapping or reworking units that do not pass Inspection. The company has 10,000 defective units
that have already cost $132,000 to manufacture. The units can be sold as scrap for $31,000 or reworked for $45,000 and then sold for
$85,000.
(a) Prepare a scrap or rework analysis of Income effects.
(b) Should the company sell the units as scrap or rework them?
(a) Scrap or Rework Analysis
Revenue from scrapped/reworked units
Cost of reworked units
Income
Incremental income
(b) The company should:
Scrap
Rework](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcb3ad3ae-ff5d-4c19-9da1-80442e856ba1%2Fc90707b6-d07c-4f22-835e-93de382161cb%2F9e5qm2_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A company must decide between scrapping or reworking units that do not pass Inspection. The company has 10,000 defective units
that have already cost $132,000 to manufacture. The units can be sold as scrap for $31,000 or reworked for $45,000 and then sold for
$85,000.
(a) Prepare a scrap or rework analysis of Income effects.
(b) Should the company sell the units as scrap or rework them?
(a) Scrap or Rework Analysis
Revenue from scrapped/reworked units
Cost of reworked units
Income
Incremental income
(b) The company should:
Scrap
Rework
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