A company must decide between scrapping or reworking units that do not pass inspection. The company has
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A company must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $78,000 or reworked for $99,000 and then sold for $187,000.
(a) Prepare a scrap or rework analysis of income effects.
(b) Should the company sell the units as scrap or rework them?
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