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:

Manufacturing Jobs

Positions or occupations involved in the production of goods in factories, involving both manual labor and operation of machinery.

Management Knowledge

The body of information and skills related to organizing, planning, directing, and controlling resources for achieving organizational objectives.

American Management Association

The American Management Association is a professional organization that provides a vast range of management development and educational services for individuals and organizations.

Managers Stress

The physical or psychological strain experienced by individuals in managerial positions, often resulting from workload, pressure to meet organizational objectives, or interpersonal conflicts in the workplace.