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 $17 per yard: $8 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 $17 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 $8 per yard.

Should Mulan repeat the coloring process or sell the carpet to Practical Home Solutions? What is the incremental benefit?