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A company has the choice of either selling 1,900 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $3 per unit. Alternatively, it could rebuild them with incremental costs of $3.00 per unit for materials, $6.00 per unit for labor, and $3.50 per unit for overhead, and then sell the rebuilt units for $13.5 each. What should the company do?

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