1. A company has an inventory of 1,000 assorted parts for a line of missiles that has discontinued. The
inventory cost is $75,000. The parts can be either (a) re-machined at total additional costs of $25,000
and then sold for $30,000 or (b) sold as scrap for $3,000. Which action is more profitable? Show your
2. A truck, costing $100,000 and uninsured, is wrecked its first day in use. It can be either (a) disposed of
for $15,000 cash and replaced with a similar truck costing $105,000 or (b) rebuilt for $85,000, and thus
be brand –new as far as operating characteristics and looks are concerned. Which action is less costly?
Show your calculations.
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