3. A company must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $44,200 or reworked for $62,400 and then sold for $117,000. (a) Prepare a scrap or rework analysis of income effects. (b) Should the company sell the units as scrap or rework them?

4. Varto Company has 7,600 units of its product in inventory that it produced last year at a cost of $151,000. This years model is better than last years, and the 7,600 units cannot be sold at last years normal selling price of $44 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $106,400 or (2) they can be processed further at an additional cost of $89,600 and then sold for $190,000. (a) Prepare a sell as is or process further analysis of income effects. (b) Should Varto sell the products as is or process further and then sell them?

5.

Suresh Company reports the following segment (department) income results for the year.

	Department M	Department N	Department O	Department P	Department T	Total
Sales	$ 89,000	$ 47,000	$ 85,000	$ 73,000	$ 46,000	$ 340,000
Expenses
Avoidable	19,800	48,400	19,100	24,000	55,800	167,100
Unavoidable	59,800	24,600	6,200	59,700	23,800	174,100
Total expenses	79,600	73,000	25,300	83,700	79,600	341,200
Income (loss)	$ 9,400	$ (26,000)	$ 59,700	$ (10,700)	$ (33,600)	$ (1,200)

a. If the company plans to eliminate departments that have sales less than avoidable costs, which department(s) would be eliminated?