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8 April, 06:48

Legendary Motors has 7,000 defective autos on hand, which cost $12,880,000 to manufacture. Legendary can either sell these defective autos as scrap for $8,000 per auto, or spend an additional $18,320,000 on repairs and then sell them for $12,000 per unit. What is the net advantage to repair the autos compared to selling them for scrap?

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  1. 8 April, 06:59
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    Net advantage to repair the autos=$9,680,000

    Explanation:

    For Scrap:

    Total sale by selling defective pieces as scrap=$8,000*7000

    Total sale by selling defective pieces as scrap=$56,000,000

    For Repair:

    Total sales by selling defectives after repair=$12,000*7000

    Total sales by selling defectives after repair=$84,000,000

    Additional Cost on repair=$18,320,000

    Remaining on selling defectives after repair=Total Sales after repairing-Additional Cost on repair

    Remaining on selling defectives after repair=$65,680,000

    Net Advantage:

    Net advantage to repair the autos=Remaining on selling defectives after repair-Total sale by selling defective pieces as scrap

    Net advantage to repair the autos=$65,680,000-$56,000,000

    Net advantage to repair the autos=$9,680,000
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Home » Business » Legendary Motors has 7,000 defective autos on hand, which cost $12,880,000 to manufacture. Legendary can either sell these defective autos as scrap for $8,000 per auto, or spend an additional $18,320,000 on repairs and then sell them for $12,000 per
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