Exercise 23-4 (Algo) Scrap or rework LO P2 A company must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $45,500 or reworked for $65,000 and then sold for $119,600. (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
Exercise 23-4 (Algo) Scrap or rework LO P2 A company must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $45,500 or reworked for $65,000 and then sold for $119,600. (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
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Exercise 23-4 (Algo) Scrap or rework LO P2
A company must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units
that have already cost $132,000 to manufacture. The units can be sold as scrap for $45,500 or reworked for $65,000 and then sold
for $119,600.
(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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