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BT&T Corporation manufactures telephones.Recently,the company produced a batch of 600 defective telephones at a cost of $9,000.BT&T can sell these telephones as scrap for $9 each.It can also rework the entire batch at a cost of $6,500,after which the telephones could be sold for $20 per unit.
-Which of the following statements is false regarding the defective units?
A)BT&T will not recover its costs if it sells the defective units as scrap.
B)BT&T will recover total costs incurred if it reworks the defective units.
C)BT&T will not recover its costs if it reworks the defective units.
D)BT&T will recover more of its additional costs if it decides to rework the defective units.

Question

Quizplus · Accepted Answer

Selling as scrap yields $9 * 600 = $5,400, not covering the $9,000 cost. Reworking costs $6,500, making total costs $15,500. Selling reworked units at $20 each yields $12,000, still not covering total costs, making statement B false. Reworking does recover more of the additional costs than selling as scrap due to the higher sale price per unit.

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