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Prepare a scrap or rework analysis of income effects

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Question - Rosa Company produced 1,200 defective phones due to a production error. The phones had cost $60,000 to produce. A salvage company will buy the defective phones as scrap for $37,200. It would cost Rosa $108,000 to rework the phones. If the phones are reworked, Rosa could sell them for $172,800.

Required -

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

b) Should Rosa scrap or rework the phones?

Reference no: EM133070811

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