Luxury Motors has 8,000 defective autos on hand, which cost $14,720,000 to manufacture. Luxury can either...
Luxury Motors has 8,000 defective autos on hand, which cost $14,720,000 to manufacture. Luxury can either sell these defective autos as scrap for $9,000 per auto, or spend an additional $19,320,000 on repairs and then sell them for $13,000 per unit. What is the net advantage to repair the autos compared to selling them for scrap?
Homework Answers
Incremental analysis
| Revenue from repairs (13000*8000) | 104000000 |
| Revenue from scrap (9000*8000) | -72000000 |
| Incremental revenue | 32000000 |
| Incremental cost | -19320000 |
| Net advantage | 12680000 |
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