-22-
A customer core could have remained in Consolidated's
unprocessed cores raw material inventory for months or years
before Consolidated drew upon it for use in Consolidated's
remanufacturing process. When demand for a type of
remanufactured automobile part was sufficiently limited (e.g., if
the vehicle for which such a type of part was to be used was an
obsolete, early model vehicle), the customer core corresponding
to that type of remanufactured automobile part might have been
put out for bid as scrap metal and sold by Consolidated at scrap
metal prices without ever having entered into production.
The following percentages of customer cores that were
delivered to Consolidated and that entered into its
remanufacturing process were subsequently determined not to be in
rebuildable condition and were scrapped:
1990 Percentage of 1991 Percentage of
Customer Cores Not Customer Cores Not
Type of in Rebuildable in Rebuildable
Customer Core Condition Condition
Engine cores 16.44 18.45
Transmission cores 14.34 23.38
Crankshaft cores 37.97 37.59
Cylinder head cores 19.00 26.13
Small part cores 10.06 6.46
Consolidated's Accounting
Consolidated used the calendar year and the accrual and
inventory methods of accounting for financial and Federal income
tax (tax) reporting purposes. Until the close of its taxable
year 1980, Consolidated reported its inventories (at least for
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