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 $37,700 or reworked for $61,100 and then sold for $113,100. (a) Prepare a scrap or rework analysis of income effects. (b) Should the company sell the units as scrap or rework them?

\begin{tabular}{|l|l|l|} \hline (a) Scrap or Rework Analysis & Scrap & Rework \\ \hline Revenue from scrapped/reworked units & & \\ \hline Cost of reworked units & & \\ \hline Income & & \\ \hline & & \\ \hline Incremental income & \\ \hline & \\ \hline (b) The company should: & \\ \hline \end{tabular}