Answer the following questions.

1.	A company has an inventory of 1,400 assorted parts for a line of missiles that has been discontinued. The inventory cost is $79,000. The parts can be either (a) remachined at total additional costs of $28,000 and then sold for $31,500 or (b) sold as scrap for $5,000. Which action is more profitable? Show your calculations.
2.	A truck costing $103,500 and uninsured is wrecked on its first day in use. It can be either (a) disposed of for $18,000 cash and replaced with a similar truck costing $104,500 or (b) rebuilt for $84,000, and, thus, be brand-new as far as operating characteristics and looks are concerned. Which action is less costly? Show your calculations.

Requirement 1. A company has an inventory of

1,400

assorted parts for a line of missiles that has been discontinued. The inventory cost is

$79,000.

The parts can be either (a) remachined at total additional costs of

$28,000

and then sold for

$31,500

or (b) sold as scrap for

$5,000.

Which action is more profitable? Show your calculations. (Only complete the necessary answer boxes.)

		(a)	(b)
		Remachine	Scrap
Deduct:
Operating income

Action

(a)

(b)

is more profitable by

$enter your response here.

Requirement 2. A truck costing

$103,500

and uninsured is wrecked on its first day in use. It can be either (a) disposed of for

$18,000

cash and replaced with a similar truck costing

$104,500

or (b) rebuilt for

$84,000,

and, thus, be brand-new as far as operating characteristics and looks are concerned. Which action is less costly? Show your calculations. (Only complete the necessary answer boxes.)

		(a)	(b)
		Replace	Rebuild
Deduct:
Total cost

Action

(a) or (b) is less costly by$ ? enter your response here.