A company must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that cost $5.40 per unit to manufacture. The units can be sold as is for $2.80 each, or they can be reworked for $4.50 each and then sold for the full price of $8.20 each. If the units are sold as is, the company will be able to build 16,000 replacement units at a cost of $5.40 each, and sell them at the full price of $8.20 each.

What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)

	Sale as scrap	Rework
Cost to rework units
Sales of scrap units
Opportunity cost of not making new units
Sales of reworked units		131200
Incremental income (loss)	$	$
This company should:	Sell as is