Answer:
It shall rework as total loss shall be reduced by $13,000
Explanation:
As provided the original cost to manufacture = $5.50
In case no rework is done, then amount to be recovered from each unit = $2.60
Thus, non recoverable amount = $5.50 - $2.60 = $2.90
In case of rework, original cost will be same = $5.50
Rework cost = $4.60
Thus, total cost incurred on each unit = $5.50 + $4.60 = $10.10
Amount to be recovered = $8.10
Amount not recoverable = $10.10 - $8.10 = $1.90
Since the loss is less in case of rework by $1 = $2.90 - $1.90
Rework shall be done as will save in total $1 [tex]\times[/tex] 13,000 = $13,000 of loss.
