Fone Zone Corporation manufactures telephones. Recently, the company produced a batch of 570 defective telephones at a cost of $8,700. Fone Zone can sell these telephones as scrap for $10 each. It can also rework the entire batch at a cost of $6,200, after which the telephones could be sold for $21 per unit.

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

Multiple Choice

• Increase by $5,770

• Increase by $6,270

• Decrease by $2,930

• Decrease by $5,770