Question

In determining whether to scrap or to rebuild defective units of product, the cost already incurred in producing the defective units is not relevant.

A) True, as the focus should be on future costs and benefits.

B) False, as sunk costs should be considered in the decision-making process.

C) True, as rebuilding defective units is always a more cost-effective option.

D) False, as scrapping defective units is generally more economical in the long run.

Answer 1

The cost already incurred in producing the defective units is not relevant. The decision to scrap or rebuild defective units should be based on future costs and benefits.

Step-by-step explanation:

In determining whether to scrap or rebuild defective units of product, the cost already incurred in producing the defective units is not relevant. The correct answer is True, as the focus should be on future costs and benefits. Sunk costs, which are costs that have already been incurred and cannot be recovered, should be ignored when making decisions. The decision to scrap or rebuild defective units should be based on future costs and benefits, such as the cost of repairing the units versus the potential revenue generated from selling them.