B&B Flooring produced 8,000 yards of its economy-grade carpet. In the coloring process, there was...
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B&B Flooring produced 8,000 yards of its economy-grade carpet. In the coloring process, there was a pigment defect and the resulting color faded. The carpet normally sells for $19 per yard, with $6 of variable cost per yard and $3 of fixed cost per yard assigned to the carpet. The company realizes that it cannot sell the faded carpet for $19 per yard through its normal channels, unless the coloring process is repeated. The incremental cost of the coloring process is $7 per yard. Ace Apartments is willing to buy the carpet in its current faded condition for $14 per yard. Should B&B repeat the coloring process or sell the carpet to Ace Apartments?
Repeat coloring for $8,000 benefit
Sell as is to Ace for $8,000 benefit
Repeat coloring for $56,000 benefit
Repeat coloring for $16,000 benefit
Sell as is to Ace for $16,000 benefit
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