Reference no: EM132552982

A job of 1,000 VCRs manufactured by K Corp. contains defective parts. The cost incurred in manufacturing these defective units is $140,000. K Corp. can sell these units as scrap materials for $45 per unit or repair all 1,000 units at a total cost of $70,000. If the units are repaired, they can be sold at the normal price of $200 per unit.

Question a) What will be the total amount of the loss incurred by K Corp. on the sale of these units if they are sold for scrap at $45 per unit?

Question b) What will be the average per-unit manufacturing cost of the VCR, including repair costs, assuming that K Corp. does the repairs?

Question c) What will be the total amount of the loss incurred by K Corp. on the sale of these units if they are repaired and sold for $200 per unit?

Question d) What is the relevant cost to K Corp. in deciding whether or not to repair the units? (State this cost as a total amount for all 1,000 units.)

Question e) Should K Corp.(1) sell the units for scrap or (2) repair the units? Underline the most profitable action, and indicate the amount of the net financial benefit of this action to the company.