The Cameron Company must decide between scrapping or reworking units that do not pass inspection. The company has 8,700 defective units that cost $14 per unit to manufacture. The defective units can be sold as is for $3.25 each, or they can be reworked for $5.25 each and then sold for the full price of $21. If the units are sold as is, the company will have to build 8,700 replacement units at $14 each, and sell them at the full price of $21.
What is the incremental income from reworking and selling the units?
Strategy: Compare incremental revenue to incremental cost