Question

Pasha Company produced 50 defective units last month at a unit manufacturing cost of $30. The defective units were discovered before leaving the plant. Pasha can sell them"as is" for $20 or can rework them at a cost of $15 and sell them at the regular price of $50. Which of the following is not relevant to the sell-or-rework decision? A.$30 manufacturing costB. $20 selling price of defective unitsC. $15 for reworkD. $50 regular selling priceE. all of these

Answer 1

Answer:

The $30 Manufacturing cost (Sunk Cost)

Explanation:

The manufacturing cost isn't relevant to the scenario as it's a sunk cost (historic cost) and has been incurred and can't be changed. Thus this cost should be disregarded when it comes to the relevant costing decision making. The selling price of defective units, the cost of the rework and the regular selling price is all relevant