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Defective units as scrap or rebuilding

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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 $8.00 per unit. Alternatively, the company could rebuild the units at an incremental cost of $1.00 per unit. If it rebuilds the units, they will not be able to produce 750 new units with a unit cost of $3.00 and a normal selling price of $15.00 each. What should the company do?

Reference no: EM131007923

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