I found the first answer, need help finding the second!
A company must decide between scrapping or reworking units that do not pass inspection. The company has 12,000 defective units that cost $5.80 per unit to manufacture. The units can be sold as is for $2.50 each, or they can be reworked for $3.50 each and then sold for the full price of $9.20 each. If the units are sold as is, the company will also be able to build 12,000 replacement units at a cost of $5.80 each, and sell them at the full price of $9.20 each.
| (1) |
What is the incremental income from selling the units as scrap? (Omit the “$” sign in your response.) |
| Incremental income | $ |
| (2) |
What is the incremental income from reworking and selling the units? (Omit the “$” sign in your response.) |
| Incremental income | $ |
| (3) |
What must the company decide? |
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