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BT&T Corporation manufactures telephones. Recently, the company produced a batch of 550 defective telephones at...

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Accounting

BT&T Corporation manufactures telephones. Recently, the company produced a batch of 550 defective telephones at a cost of $8,500. BT&T can sell these telephones as scrap for $9 each. It can also rework the entire batch at a cost of $6,000, after which the telephones could be sold for $20 per unit.

If BT&T reworks the defective telephones, by how much will its operating income change?

Multiple Choice

  • Increase by $6,050

  • Increase by $5,000

  • Decrease by $5,000

  • Decrease by $3,500

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