Business, 01.08.2020 05:01 jbdelarosa

Assuming that the MR Corporation has an inventory of 200 defective motors costing $450,000 to produce and $150,000 to repair, the repaired units can be sold for $425,000.The company receives an offer to purchase these motors for $325,000 before repairing them. The company's decision should be to sell the motors at the offered price. The $450,000 production costs are sunk costs and therefore irrelevant to the decision. Net proceed from the sale of repaired units is $275,000 (Proceeds from sale of reworked units $425,000 - relevant costs for repair $150,000)compared to the offer to purchase for $325,000.Since the offer price is more than the net proceed from the sale of repaired units, the decision should be to sell the motors at the offered price.

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Assuming that the MR Corporation has an inventory of 200 defective motors costing $450,000 to produc...

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