A Company Has the Choice of Either Selling 1,000 Defective

question 63

Multiple Choice

A company has the choice of either selling 1,000 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $4.00 per unit. Alternatively, it could rebuild them with incremental costs of $1.00 per unit for materials, $2.00 per unit for labor, and $1.50 per unit for overhead, and then sell the rebuilt units for $8.00 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) Neither sell nor rebuild because both alternatives produce a loss. Instead, the company should store the units permanently.
• E) Throw the units away.

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Definitions:

Max Schmeling

A German heavyweight boxer famous for his bouts in the 1930s, including a championship victory and a politically charged defeat against Joe Louis.

Anti-German Sentiment

Negative perceptions and feelings towards Germans, often manifesting in social, economic, and political discrimination, especially noted during World War I and II.

Camp Lejune

A military training facility for the United States Marine Corps located in North Carolina, known for its extensive size and training capabilities.

Exclusionary Policy

Policies or practices that deliberately exclude certain groups or individuals from participation or benefits, often based on race, gender, or other identifiers.