Ryan Miller Toys manufactured 500 stuffed lobsters that were defective. The manufacturing costs of..

Ryan Miller Toys manufactured 500 stuffed lobsters that were defective. The manufacturing costs of the lobsters were: Direct materials ………. $30 Direct labor ……….. 24 Variable overhead ……… 10 Fixed overhead ………. 12 The lobsters normally sell for $100. The company can rework the lobsters, which will cost $20 for direct materials, $20 for direct labor, and $2 for variable overhead. In addition, fixed overhead will be applied at the rate of 75 percent of direct labor cost. Alternatively, the company could sell the lobsters “as is” for a selling price of $70. Required What should management do to maximize profits?