Ahngram Corp. has 1,000 defective units of a product that cost $3.50 per unit in direct costs and $7.00 per unit in indirect cost when produced last year. The units can be sold as scrap for $4.50 per unit or reworked at an additional cost of $3.00 and sold at full price of $13.50. The incremental net income (loss) from the choice of reworking the units would be:

Multiple Choice

$4,500 higher if the units are reworked.

$13,500 higher if the units are reworked.

$3,000 lower if the units are reworked.

$6,000 higher if the units are reworked.

$3,000 higher if the units are reworked.