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Prepare a scrap or rework analysis of income effects

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Question - Rosa Company produced 1,275 defective phones due to a production error. The phones had cost $61,000 to produce. A salvage company will buy the defective phones as scrap for $40,800. It would cost Rosa $102,000 to rework the phones. If the phones are reworked, Rosa could sell them for $170,850.

Required -

(a) Prepare a scrap or rework analysis of income effects.

(b) Should Rosa scrap or rework the phones?

Reference no: EM133062902

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