Question 1 of 1 The management of City Front Inc must decide

Question 1 of 1 The management of City Front Inc. must decide between scrapping or reworking units that do not pass inspection. The company has 11,000 defective units that cost $6.00 per unit to manufacture. The units can be sold as is for $2.50 each or they can be reworked for $3.50 each and then sold for the full price of $9.70 each. What is (are) the relevant cost(s) in this decision? O Rework cost of $3.50 per unit O Manufacturing cost of $6.00 and rework cost of $3.50 per unit O Rework cost of $3.50 and opportunity cost of $2.50 per unit Manufacturing cost of $3.50 and opportunity cost of $2.50 per unit submit answer & continue Slide 7+

Solution

Relevant costs are costs that can be avoidable when making business decisions, The concept of relevant cost is used to eliminate the unnecessary data that could complicate the decision making .

In the given question the relevant costs are :

Rework cost of $3.5 and oppurtunity cost of $ 2.50