A company has the choice of either selling 600 defective units as scrap or rebui

Question

A company has the choice of either selling 600 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $8.00 per unit. Alternatively, it could rebuild them with incremental costs of $2.00 per unit for materials, $2.00 per unit for labor, and $1.00 per unit for overhead, and then sell the rebuilt units for $16.00 each. What should the company do?

a) Either choice works becasuse they have the same result

b) Sell the units as scrap

c) Neither choice works because both alternative produce a loss for the company and the units should be abandoned

d) Throw the units in the trash

e) Rebuild the units

Explanation / Answer

e) Rebuild the units

sell scrap =600*8 =2400

rework =600*(16-5) =6600

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.