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Pitak Corp. makes and sells a product that normally sells for $23. Because of a defective machine, 1,000 units were not produced correctly and remain
Pitak Corp. makes and sells a product that normally sells for $23. 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 | $5.00 per unit |
Direct labor | $3.00 per unit |
Variable Overhead | $2 per unit |
Fixed Overhead | $0.25 per unit |
The company has two options regarding the defective units: (1) be sold for $8 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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