Reworked units, casts of rework
Response to the following problem:
White Goods assembles washing machines at its Auburn plant. In February 2009, 60 tumbler units that cost $44 each (from a new supplier who subsequently went bankrupt) were defective and had to be disposed of at zero net disposal value. White Goods was able to rework all 60 washing machines by substituting new tumbler units purchased from one of its existing suppliers. Each replacement tumbler cost $50.
1. What alternative approaches are there to account for the material cost of reworked units?
2. Should White Goods use the $44 tumbler or the $50 tumbler to calculate the cost of materials reworked? Explain.
3. What other costs might White Goods include in its analysis of the total costs of rework due to the tumbler units purchased from the (now) bankrupt supplier?