APM exam March 2020

I think you are referring to the question Folt Manufacturing from March/June 2019. Cost details: Note 9 = 2.5% fail; reworking per bad product = 20 Average cost per unit is therefore 0.025 x 20 = 0.5 OR Total cost of failures over remaining production = 250,000 x 0.025 x 20 = 125,000 Cost per unit = 125,000/250,000 = 0.5

250,000 are to be sold. That means that 250,000 will be made, of which 2.5% have to be reworked before they can be sold. Your approach would be correct if 250,000 were sold after some had been scrapped rather than being reworked.