Jasper Joints has 1,000 obsolete joints on hand. These units were produced a year ago at a cost of $10,000. The units could be scrapped for $1,000 or reworked for $2,000 and sold for $5,000. Which alternative is desirable and why?
A) Scrap, profit of $1,000 is higher than the other option
B) Rework, incremental loss $7,000
C) Rework, profit of $3,000 is higher than the other option
D) Scrap, incremental loss $9,000

Question

Quizplus · Accepted Answer

Reworking the joints costs $2,000 and they can be sold for $5,000, resulting in a net gain of $3,000. Scrapping them would only yield $1,000. Therefore, reworking and selling them is the more profitable option.

Jasper Joints Has 1,000 Obsolete Joints on Hand