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A company must decide between scrapping or reworking units that do not pass inspection. The company has 13,000 defective units that cost $5.60 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 $9.40 each. If the units are sold as is, the company will also be able to build 13,000 replacement units at a cost of $5.60 each, and sell them at the full price of $9.40 each. What is the incremental income from reworking and selling the units?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9990567

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