BT&T Corporation manufactures telephones. Recently, the company produced a batch of 550 defective telephones at a cost of $8,500. BT&T can sell these telephones as scrap for $9 each. It can also rework the entire batch at a cost of $6,000, after which the telephones could be sold for $20 per unit.

If BT&T reworks the defective telephones, by how much will its operating income change?

Multiple Choice

• Increase by $6,050

• Increase by $5,000

• Decrease by $5,000

• Decrease by $3,500