Let's break down the problem step by step:

Loss incurred by selling units for scrap:

Total cost incurred in manufacturing defective units $=$ $$140,000$

Number of defective units $=1,000$

Cost per unit $=$ Total cost $/$ Number of units $=$ $$140,000/1,000=$ $$140$ per unit

Selling price per unit as scrap $=$ $$45$

Loss per unit $=$ Cost per unit $-$ Selling price per unit $=$ $$140-$ $$45=$ $$95$

Total loss $=$ Loss per unit $*$ Number of defective units $=$ $$95*1,000=$ $$95,000$

Loss incurred by repairing and selling units:

Cost of repair per unit $=$ $$70$

Selling price per unit after repair $=$ $$200$

Profit per unit $=$ Selling price per unit $-$ Cost of repair per unit $=$ $$200-$ $$70=$ $$130$

Total profit $=$ Profit per unit $*$ Number of defective units $=$ $$130*1,000=$ $$130,000$

Sunk cost:

Yes, there is a sunk cost, which is the cost incurred in manufacturing the defective units. This is the $$140,000$ already spent by K Corp.

Relevant cost:

The relevant cost to K Corp. in deciding whether to repair the units is the difference between the repair cost and the selling price per unit after repair. In this case, it's $$70-$ $$200=-$$$130($profit per unit$).$ This indicates that repairing the units would generate a profit of $$130$ per unit.

Decision:

Based on the analysis:

If K Corp sells the units for scrap, it will incur a total loss of $$95,000.$

If K Corp repairs the units, it will make a profit of $$130,000.$

Therefore, K Corp should repair the units as it is the most profitable action. The profit from repairing the units exceeds the loss from selling them for scrap by $$35,000$