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:

Medical Insurance Benefits

Financial protection provided by health insurance plans against medical expenses incurred from illness or injury.

Medicaid Program

A government health insurance program in the United States that provides health care services to low-income individuals and families.

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Insurance costs paid by healthcare providers and professionals to protect against legal claims alleging negligence or inadequate care.

Physicians

Medical professionals licensed to diagnose and treat illness and injury in patients.