Answer:
Signal Company
Signal should rework the phones with its excess capacity. Reworking reduces its loss by $10,000 (or $10 per phone).
Explanation:
a) Data and Calculations:
Number of defective cell phones produced = 1,000
Cost of production per phone = $60
Salvage value per phone = $30
Additional rework cost per phone = $80
Selling price after reworking per phone = $120
Differential Analysis:
Scrap Rework Difference
Sales revenue $30,000 $120,000 $90,000
Cost of production 60,000 140,000 80,000
Loss $30,000 $20,000 $10,000
Per unit calculations:
Scrap Rework Difference
Sales revenue $30 $120 $90
Cost of production 60 140 80
Loss $30 $20 $10
