A Company Must Decide Between Scrapping or Rebuilding Units That

question 17

Essay

A company must decide between scrapping or rebuilding units that do not pass inspection. The company has 15,000 such units that cost $6 per unit to manufacture. The units were built to satisfy a special order, which must still be satisfied if the defective units are scrapped. The units can be sold as scrap for $2.50 each or they can be reworked for $4.50 each and sold for the full price of $9.00 each. If the units are sold as scrap, the company will have to build 15,000 replacement units and sell them at the full price.
Required:
(1) What is the net return from selling the units as scrap?
(2) What is the net return from reworking and selling the units?
(3) Should the company sell the units as scrap or rework them?

Apply knowledge of probability distributions to interpret and perform calculations regarding real-life scenarios.

Understand the concept of probability in the context of random sampling and its calculation in different scenarios.

Comprehend the role of the normal distribution in statistical analysis and its properties.

Grasp the concept of z-scores and their application in determining probabilities within a normal distribution.

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Definitions:

Import An Existing Database

The process of bringing data from one database into another, enabling the integration or analysis of information from different sources.

Open An Existing Database

The action of accessing a database file that has already been created and stored on a storage medium.

Create A Database From A Template

The process of establishing a new database by using a pre-designed structure and format provided as a template.

Calculations On Groups

A process in databases and spreadsheets where summary calculations, such as sums or averages, are performed on a categorized set of data or groups of data.