Fone Zone Corporation manufactures telephones. Recently, the company produced a batch of 560 defective telephones at a cost of $8,600. Fone Zone can sell these telephones as scrap for $8 each. It can also rework the entire batch at a cost of $6,100, after which the telephones could be sold for $19 per unit.

If Fone Zone reworks the defective telephones, by how much will its operating income change?

Multiple Choice

• Increase by $4,540

• Increase by $6,160

• Decrease by $4,540

• Decrease by $4,060