Question
Duffy Dog Carpet produced 1,218 yards of its economy-grade carpet. In the coloring process, there was a pigment defect, and the resulting color appeared to
Duffy Dog Carpet produced 1,218 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 $18 per yard: $8 of variable cost per yard and $7 of fixed cost per yard have been assigned to the carpet. The company realizes that it cannot sell the carpet for $18 per yard through its normal channels, unless the coloring process is repeated. The incremental cost of the process is $3 per yard. However, Practical Home Solutions is willing to buy the carpet in its current faded condition for $9 per yard. Should Duffy Dog repeat the coloring process or sell the carpet to Practical Home Solutions?
Duffy Dog should repeat the coloring processsell the carpet to Practical Home Solutions . Total incremental benefit is $ . |
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