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This problem describes a decision-making scenario for Lightning Ltd., which needs to decide whether to sell or rework 10,000 defective hand-meters. Let’s break it down into two options and compute the net profit in each case:

### 1. **Selling the units "as is"**:
- **Production cost per unit**: $10
- **Selling price per unit (as is)**: $4
- **Number of units**: 10,000

If sold as is:
- Total revenue = $ 4 \, \text{(price per unit)} \times 10,000 = 40,000 \, \text{USD} $
- Total production cost = $ 10 \, \text{(cost per unit)} \times 10,000 = 100,000 \, \text{USD} $
- **Loss** = Total revenue − Total production cost = $ 40,000 - 100,000 = -60,000 \, \text{USD} $ (a $60,000 loss)

### 2. **Reworking the units**:
- **Rework cost per unit**: $8
- **Selling price after rework**: $15 per unit
- **Number of units**: 10,000

If reworked and sold:
- Rework cost = $ 8 \, \text{(rework cost per unit)} \times 10,000 = 80,000 \, \text{USD} $
- Selling price after rework = $ 15 \, \text{(price per unit after rework)} \times 10,000 = 150,000 \, \text{USD} $
- Total cost (initial production + rework) = $ 100,000 + 80,000 = 180,000 \, \text{USD} $
- **Loss** = Selling price after rework − Total cost = $ 150,000 - 180,000 = -30,000 \, \text{USD} $

However, we are also told that reworking these units will prevent the production of a further 10,000 units. Assuming these units could have been sold at $15 each and their production cost remains $10:

- Foregone profit from preventing normal production = $ (15 - 10) \times 10,000 = 50,000 \, \text{USD} $

Therefore, total loss from reworking becomes:
- $ 30,000 + 50,000 = 80,000 \, \text{USD} $

### Recommendation:
- **Selling the units as is results in a loss of $60,000**.
- **Reworking the units results in a total loss of $80,000** (including the lost opportunity cost of preventing further production).

Thus, **the better option is to sell the units "as is"**, as it results in a smaller loss of $60,000 compared to $80,000 if the units are reworked.

Would you like further clarification on any part of this? 

Here are five related questions:
1. What is the break-even point for reworking the units?
2. How does opportunity cost affect business decisions in production?
3. If reworking did not affect future production, would the decision change?
4. Can you analyze the long-term impact of selling substandard goods on brand reputation?
5. What strategies can Lightning Ltd. adopt to minimize production failures?

**Tip**: Always consider opportunity cost when making decisions that may affect future production.

Lightning Ltd manufactures hand-meters. It has 10,000 units that failed the final quality test. Production cost at this stage is $10 per unit and they can be sold as is for $4 per unit. The units can be reworked at a cost of $8 per unit and be sold at a normal selling price of $15 each. If they are sent back for reworking, normal production will be disrupted and the production of a further 10,000 units will be prevented. Required: With supporting computations, recommend the course of action to take.

Learn how to compute the optimal decision between selling as-is or reworking defective products with a full breakdown of the cost-benefit analysis. This case covers business decision-making processes and loss minimization strategies. Suitable for business studies and decision-making analysis.

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