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 $13,000$ defectlve units that have already cost $$132,000$ to manufacture. The units can be sold as scrap for $$32,500$ or reworked for $$62,400$ and then sold for $$102,700.$

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

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