Assuming That the MR Corporation Has an Inventory of 200

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 $275,000.The company receives an offer to purchase these motors for $100,000 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 $125,000 (Proceeds from sale of reworked units $275,000 - relevant costs for repair $150,000)compared to the offer to purchase for $100,000.Since the offer price is less than the net proceed from the sale of repaired units,the decision should be not to sell the motors at the offered price.