10.5

Garcia Company has 10,800 units of its product that were produced at a cost of $162,000. The units were damaged in a rainstorm. Garcia can sell the units as scrap for $32,400, or it can rework the units at a cost of $51,200 and then sell them for $67,400. (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