Garcia Company has 10,000 units of its product that were produced at a cost of ($ 150,000).
Question:
Garcia Company has 10,000 units of its product that were produced at a cost of \(\$ 150,000\). The units were damaged in a rainstorm. Garcia can sell the units as scrap for \(\$ 20,000\), or it can rework the units at a cost of \(\$ 38,000\) and then sell them for \(\$ 50,000\).
(a) Prepare a scrap or rework analysis of income effects.
(b) Should Garcia sell the units as scrap or rework them and then sell them?
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