Rosa Company produced 1,375 defective phones due to a production error. The phones had cost $67,000 to produce. A salvage company will buy the defective phones as scrap for $53,625. It would cost Rosa $112,750 to rework the phones. If the phones are reworked, Rosa could sell them for $195,250. (a) Prepare a scrap or rework analysis of income effects. (b) Should Rosa scrap or rework the phones? (a) Scrap or Rework Analysis Scrap Rework Revenue from scrapped/reworked units Cost of reworked units Income (b) The company should: A company must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $43,200 or reworked for $76,800 and then sold for $129,600. (a) Prepare a scrap or rework analysis of income effects. (b) Should the company sell the units as scrap or rework them? (a) Scrap or Rework Analysis Scrap Rework Revenue from scrapped/reworked units Cost of reworked units Income Incremental income (b) The company should: $ 0 $ 0