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Firefox File Edit View History Bookmarks Tools Window Help ? ??100% Eal. Sat 7:13 PM Atika Ishtiaq a E C Chegg Study | Guided Solutions X Connect C A Company Must Decide Betwe X+ https:/newconnect.mheducation.com/flow/connect.htm .Search Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. Return to question Exercise 10-6 Scrap or r ework LO A1 A company must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that cost $6.00 per unit to manufacture. The units can be sold as is for $3.10 each, or they can be reworked for $4.60 each and then sold for the full price of $9.10 each. If the units are sold as is, the company will be able to build 16,000 replacement units at a cost of $6.00 each, and sell them at the full price of $9.10 each. points 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.) Answer is not complete. Rework $ 49,600 Sales cf scrap units Sales of reworked units Cast to rework units Opportunity cost of not making new units 145,600 Incremental income (loss) $ 49,600 145,600 The company should: Sell as is Mc Graw Prev1 of 1 Next

Explanation / Answer

Note : Opportunity cost of not making new units= 16000 units* ($9.1-$6)

= $49,600

Note :Cost to rework units = 16000units*$4.6 = $73,600

SALE AS SCRAP REWORK Sales of Scrap units $49,600 Sales of reworked units $145,600 Cost to rework units ($73,600) Opportunity cost of not making new units ($49,600) Incremental income (loss) $49,600 $22,400 The company should: sell as is

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