Problem 7-7

Accustart Carpet produced 1,271 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.

Should Accustart repeat the coloring process or sell the carpet to Practical Home Solutions?

Accustart should (Sell the carpet or Repaet the process) Total incremental benefit is $ ?.