A Company Has the Choice of Either Selling 600 Defective

question 56

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 is the amount of incremental cost from rebuilding?

• A) $3.00 per unit.
• B) $5.00 per unit.
• C) $7.00 per unit.
• D) $2.40 per unit.
• E) $0.60 per unit.

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Definitions:

Shift Left

In software development, the practice of integrating and addressing quality and testing earlier in the development process.

Demand

The total quantity of a good or service that consumers are willing and able to purchase at various prices.

Chipotle

An international chain of fast-casual restaurants specializing in tacos and Mission-style burritos.

Inferior Good

Goods whose demand declines as consumer income rises, distinct from normal goods where demand increases with higher income.