Chapter 18, Problem 18.33E

Reworked units, costs of rework. Heyer Appliances assembles dishwashers at its plant in Tuscaloosa, Alabama. In February 2017, 60 circulation motors that cost $110 each (from a new supplier who subsequently went bankrupt) were defective and had to be disposed of at zero net disposal value. Heyer Appliances was able to rework all 60 dishwashers by substituting new circulation motors purchased from one of its existing suppliers. Each replacement motor cost $125.

1. 1. What alternative approaches are there to account for the materials cost of reworked units?

Required

1. 2. Should Heyer Appliances use the $110 circulation motor or the $125 motor to calculate the cost of materials reworked? Explain.
2. 3. What other costs might Heyer Appliances include in its analysis of the total costs of rework due to the circulation motors purchased from the (now) bankrupt supplier?