Chang Industries Has 2,000 Defective Units of Product That Already

Chang Industries has 2,000 defective units of product that already cost $14 each to produce.A salvage company will purchase the defective units as is for $5 each.Chang's production manager reports that the defects can be corrected for $6 per unit,enabling them to be sold at their regular market price of $21.The $14 per unit is a:

A) Incremental cost.
B) Sunk cost.
C) Out-of-pocket cost.
D) Opportunity cost.
E) Period cost.

Correct Answer:

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