A company must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $44,800 or reworked for $76,800 and then sold for $131,200. (a) Prepare a scrap or rework analysis of income effects. (b) Should the company sell the units as scrap or rework them? Answer is complete but not entirely correct. (a) Scrap or Rework Analysis Scrap Rework Revenue from scrapped/reworked units $ 44,800 $ 131,200 Cost of reworked units (76,800) Income $ 44,800 54,400 Incremental income $ 6,400 X |(b) The company should: Rework the units

A company must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $44,800 or reworked for $76,800 and then sold for $131,200. (a) Prepare a scrap or rework analysis of income effects. (b) Should the company sell the units as scrap or rework them? Answer is complete but not entirely correct. (a) Scrap or Rework Analysis Scrap Rework Revenue from scrapped/reworked units $ 44,800 $ 131,200 Cost of reworked units (76,800) Income $ 44,800 54,400 Incremental income $ 6,400 X |(b) The company should: Rework the units

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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