Reference no: EM132547169

Question 1: 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 $18 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 $18 per yard through its normal channels, unless the coloring process is repeated. The incremental cost of the coloring process is $4 per yard. Ace Apartments is willing to buy the carpet in its current faded condition for $13 per yard. Should B&B repeat the coloring process or sell the carpet to Ace Apartments?

Option A. Repeat coloring for $56,000 benefit

Option B. Sell 'as is' to Ace for $56,000 benefit

Option C. Repeat coloring for $8,000 benefit

Option D. Sell 'as is' to Ace for $32,000 benefit