Question
Corp. makes and sells a product that normally sells for $20. Because of a defective machine, 1,000 units were not produced correctly and remain in
Corp. makes and sells a product that normally sells for $20. Because of a defective machine, 1,000 units were not produced correctly and remain in inventory. Each of the defective unit has the following costs assigned to it by the company's absorption costing system: Direct materials $6.00 per unit Direct labor $4.00 per unit Variable Overhead $2.5 per unit Fixed Overhead $1.8 per unit The company has two options regarding the defective units: (1) be sold for $9 per unit, or (2) repaired and sold at the regular price. Q:) What is the maximum cost of repair per unit in order for the company to choose option (2)?
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