A Company Has the Choice of Either Selling 750 Defective

question 54

Multiple Choice

A company has the choice of either selling 750 defective units as scrap or rebuilding them.They have already spent $14 per unit making these items.The company could sell the defective units as they are for $8 per unit.Alternatively,it could rebuild them with incremental costs of $3 per unit for materials,$3per unit for labor,and $1per unit for overhead,and then sell the rebuilt units for $15.00 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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