Scrap or Rework Scrap Rework Sale of scrapped/reworked units (500 units) Less costs to rework defects ($80 per unit) Incremental net income $35,000 $62,500 (40,000) $35,000 $22,500 Knowledge Check 01 The management of City Front Inc. must decide between scrapping or reworking units that do not pass inspection. The company has 11,000 defective units that cost $6.00 per unit to manufacture. The units can be sold as is for $2.50 each or they can be reworked for $3.50 each and then sold for the full price of $9.70 each. What is the incremental income from reworking and selling the units? O $68,200 $40,700 O $27,500 O $106,700