QS 10-10 (Algo) Scrap or rework LO P2 Rosa Company produced 1,450 defective phones due to a production error. The phones had cost $68,000 to produce. A salvage company will buy the defective phones as scrap for $56,550. It would cost Rosa $130.500 to rework the phones. If the phones are reworked, Rosa could sell them for $188,500 (a) Prepare a scrap or rework analysis of income effects. (b) Should Rose scrap or rework the phones? Answer is complete but not entirely correct. (a) Scrap or Rework Analysis, Scrap Rework Revenue from scrapped reworked units 15 60,000 $ 80.000 x Cost of reworked units 13,200 income 66,000 S 74,800 x (b) The company should Rework and sell units QS 10-10 (Algo) Scrap or rework LO P2 Rosa Company produced 1,450 defective phones due to a production error. The phones had cost $68,000 to produce. A salvage company will buy the defective phones as scrap for $56,550. It would cost Rosa $130.500 to rework the phones. If the phones are reworked, Rosa could sell them for $188,500 (a) Prepare a scrap or rework analysis of income effects. (b) Should Rose scrap or rework the phones? Answer is complete but not entirely correct. (a) Scrap or Rework Analysis, Scrap Rework Revenue from scrapped reworked units 15 60,000 $ 80.000 x Cost of reworked units 13,200 income 66,000 S 74,800 x (b) The company should Rework and sell units