A company with excess capacity must decide between scrapping or reworking units
that do not pass inspection. The company has 16,000 defective units that cost $5.90 per unit to manufacture. The units can be a) sold as is for $3.30 each, or b) reworked for $4.80 each and then sold for the full price of $9.20 each.
What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them?