1. A company has an inventory of 1,000 assorted parts for a line ofmachines that has been dis¬

continued. The inventory cost is $88,000. The parts can be either

(a) remachined at total additional costs of $33,000 and then sold for $38,500 or

(b) sold as scrap for $2,200. Which action is more profitable? Show your calculations.

2. A truck, costing $110,000 and uninsured, is wrecked its first day in use. It can be either

(a) disposed of for $11,000 cash and replaced with a similar truck costing $112,200 or

(b) rebuilt for $93,500 and thus be brand-new as far as operating characteristics and looks are concerned. Which action is less costly? Show your calculations.