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A job of 2,500 light bulbs manufactured by Flashlight Corp. contains defective parts. The cost incurred in manufacturing these defective units is $250,000. Flashlight Corp.
A job of 2,500 light bulbs manufactured by Flashlight Corp. contains defective parts. The cost incurred in manufacturing these defective units is $250,000. Flashlight Corp. can sell these units as scrap materials for $60 per unit or repair all 2,500 units at a total cost of $180,000. If the units are repaired, they can be sold at the normal price of $177 per unit. 1 What will be the total amount of the loss incurred by Flashlight Corp. on the sale of these units if they are sold for scrap at $60 per unit? 2 What will be the average per-unit manufacturing cost of the Light Bulbs, including repair costs, assuming that Flashlight Corp. does the repairs? What will be the total amount of the loss incurred by Flashlight Corp. on the sale of these units if they are repaired and sold for $177 per unit? 4 What is the relevant cost to Flashlight Corp. in deciding whether or not to repair the units? (State this cost as a total amount for all 2,500 units.) 5 Should Flashlight Corp. (1) sell the units for scrap or (2) repair the units? (Show calculation to support your decision)
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