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Road Master Shocks has 15,000 units of a defective product on hand that cost $80,000 to manufacture
Road Master Shocks has 15,000 units of a defective product on hand that cost $80,000 to manufacture. The company can either sell this product as scrap for $6 per unit or it can sell the product for $9 per unit by reworking the units and correcting the defects at a cost of $40,000.
Prepare a schedule to show the effect of selling the defective units as scrap or rework.
Scrap value of units
•
Net proceeds from sale of reworked units
•
•
Expert Solution
Schedule showing the effect of selling the defective units as scrap or rework:
| Scrap value (15,000*6) | 90,000 |
|
Net proceeds from sale of reworked units (15,000*9) - 40,000 |
95,000 |
| Net benefit of selling the reworked units | 5,000 |
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