A company must decide between scrapping or reworking units that do not pass Inspection. The company has 19,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $58,900 or reworked for $91,200 and then sold for $161,500. (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 Revenue from scrapped/reworked units Cost of reworked units Income Incremental income (b) The company should: $ Scrap 0 $ Rework 0

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 19E: Walloon Company produced 150 defective units last month at a unit manufacturing cost of 30. The...
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A company must decide between scrapping or reworking units that do not pass Inspection. The company has 19,000 defective units
that have already cost $132,000 to manufacture. The units can be sold as scrap for $58,900 or reworked for $91,200 and then sold for
$161,500.
(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
Revenue from scrapped/reworked units
Cost of reworked units
Income
Incremental income
(b) The company should:
$
Scrap
0 $
Rework
0
Transcribed Image Text:A company must decide between scrapping or reworking units that do not pass Inspection. The company has 19,000 defective units that have already cost $132,000 to manufacture. The units can be sold as scrap for $58,900 or reworked for $91,200 and then sold for $161,500. (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 Revenue from scrapped/reworked units Cost of reworked units Income Incremental income (b) The company should: $ Scrap 0 $ Rework 0
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