$12$

Exercise $25-4($Algo$)$ Scrap or rework LO P$2$

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 $$132,000$ to manufacture. The units can be sold as scrap for $$43,200$ or reworked for $$78,400$ and then sold for $$126,400.$

$4$

points

$($a$)$ Prepare a scrap or rework analysis of Income effects.

$($b$)$ Should the company sell the units as scrap or rework them?

$\backslash$table$[[($a$)$ Scrap or Rework Analysis,Scrap,Rework$],[$Revenue from scrapped$/$reworked units$],[$Cost of reworked units$],[$Income$],[$Incremental income,,$],[($b$)$ The company should:,,$]]$