Mulan Carpet produced 1,200 yards of its economy-grade carpet. In the coloring process, there was a pigment defect, and the resulting color appeared to be faded. The carpet normally sells for $15 per yard: $7 of variable cost per yard and $6 of fixed cost per yard have been assigned to the carpet. The company realizes that it cannot sell the carpet for $15 per yard through its normal channels, unless the coloring process is repeated. The incremental cost of the process is $2 per yard. However, Practical Home Solutions is willing to buy the carpet in its current faded condition for $9 per yard.

Required

a. Should Mulan repeat the coloring process or sell the carpet to Practical Home Solutions?

b. Suppose Practical Home Solutions is willing to buy the carpet for $14 per yard if Mulan's brand is associated with the carpet by means of a tag indicating the carpet was produced by Mulan (a highly regarded producer).Would you accept Practical Home Solutions' offer if you were the president of Mulan?