Micron Manufacturing produces electronic equipment. This year, it produced 7,500 oscilloscopes at a manufacturing cost of $300 each. These oscilloscopes were damaged in the warehouse during storage and, while usable, cannot be sold at their regular selling price of $500 each. Management has investigated the matter and has identified three alternatives for these oscilloscopes.
1. They can be sold to a wholesaler for $75 each.
2. They can be disassembled at a cost of $400,000 and the parts sold to a recycler for $130 each.
3. They can be reworked and turned into good units. The cost of reworking the units will be $3,200,000, after which the units can be sold at their regular price of $500 each.
Required
Which alternative should management pursue? Show analysis for each alternative.