Reference no: EM132560031

Question 1 - Y Corporation produced 10,000 defective radios. The radios cost $8 each. A salvage company will pay $3 each for the defective radios. Y's production manager reports that the defects can be corrected for $5 per unit, enabling them to be sold at their regular price of $12.50 each. Y should:

A. Sell the units to the salvage company for $3 per unit.

B. Correct the defects and sell the radios at the regular price.

C. Sell the radios at $3 because repairing them will cause their total cost to exceed their selling price.

D. Sell 5,000 radios to the salvage company and repair the remainder.

E. Do something else.

Question 2 - X Corporation is considering buying a $25,000 machine. Its estimated useful life is 5 years, with no salvage value. X anticipates annual net income after taxes of $1,500 from the new machine. What is the rate of return on average investment, assuming that X uses straight-line depreciation and that the net income is earned uniformly throughout each year?

A. 6.0%

B. 8.0%

C. 12.0%

D. 26.0%

E. 52.0%