A Company Has the Choice of Either Selling 600 Defective

question 81

Multiple Choice

A company has the choice of either selling 600 defective units as scrap or rebuilding them.The company could sell the defective units as they are for $2.00 per unit.Alternatively,it could rebuild them with incremental costs of $0.60 per unit for materials,$1.00 per unit for labor,and $0.80 per unit for overhead,and then sell the rebuilt units for $5.00 each.What should the company do?

• A)Sell the units as scrap.
• B)Rebuild the units.
• C)It does not matter because both alternatives have the same result.
• D)Since both alternatives produce a loss,store the units in hopes of a better price later.
• E)Throw the units away.

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Definitions:

Just Compensation

A principle requiring that if private property is taken for public use, the owner must be fairly compensated.

Real Property

Land and anything permanently affixed to it, such as buildings or structures.

Douglas Fir Trees

A species of coniferous tree known for its tall growth and significant timber production.

Leased Premises

Property that is rented under a lease agreement, typically for commercial or residential use.