A company must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $44,800 or reworked for $78,400 and then sold for $129,600. (a) Prepare a scrap or rework analysis of income effects. (b) Should the company sell the units as scrap or rework them? (a) Scrap or Rework Analysis Scrap Rework Revenue Costs 132,000 Income (loss) $ 132,000 $ 0 Incremental income (or loss) (b) The company should: Varto Company has 7,000 units of its product in inventory that it produced last year at a cost of $155,000. This year's model is better than last year's, and the 7,000 units cannot be sold at last year's normal selling price of $47 each. Varto has two alternatives for these units: (1) They can be sold as is to a wholesaler for $98,000 or (2) they can be processed further at an additional cost of $126,200 and then sold for $217,000. (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? Sell As Is Process Further (a) Sell or Process Analysis Revenue Costs Income $ 0 $ 0 Incremental income (loss) to sell as is (b) The company should