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A company has 33,000 units - Resale or rework?

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A company has 33,000 units of its sole product that it produced last year at a cost of $71 each. This year's model is superior to last year's and the 33,000 units cannot be sold for their regular selling price of $127 each. The company has two alternatives for these items: (1) they can be sold to a wholesaler for $45 each, or (2) they can be reworked at a total cost of $700,000 and then sold for $53 each. The company has enough idle capacity to rework these items without affecting any new production. Which choice would increase the company's profits the most? Show your analysis.

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Solution Summary

Your tutorial is in excel, attached, and shows two analyses for the two alternatives. The two irrelevant costs are mentioned.

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Your tutorial is in excel, attached, and shows two analyses for the two alternatives. The two irrelevant costs are mentioned.

units from last year ...

Solution provided by:
Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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