3-23

A company must decide between scrapping or reworking units that do not pass inspection. The company has 10,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $31,000 or reworked for $50,000 and then sold for $89,000 (a) Prepare a scrap or rework analysis of income effects. (b) Should the company sell the units as scrap or rework them