honda - Thus, Benefit Cost = $90 million $80 million = $10...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
The benefit of the rebate is that Honda will sell more vehicles and earn a profit on each additional vehicle sold: Benefit = Profit of $6,000 per vehicle × 15,000 additional vehicles sold = $90 million. The cost of the rebate is that Honda will make less on the vehicles it would have sold: Cost = Loss of $2,000 per vehicle × 40,000 vehicles that would have sold without rebate = $80 million.
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Thus, Benefit Cost = $90 million $80 million = $10 million, and offering the rebate looks attractive. (Alternatively, we could view it in terms of total, rather than incremental, profits. The benefit as $6000/vehicle 55,000 sold = $330 million, and the cost is $8,000/vehicle 40,000 sold = $320 million....
View Full Document

This note was uploaded on 08/22/2011 for the course ACCOUNTING 201 taught by Professor Stevejoseph during the Winter '11 term at Aarhus Universitet.

Ask a homework question - tutors are online