Reference: 09-02
Tolar Company has 400 obsolete desk calculators that are carried in inventory at a total cost of $26,800. If these calculators are upgraded at a total cost of $10,000, they can be sold for a total of $30,000. As an alternative, the calculators can be sold in their present condition for $11,200.
-What is the net advantage or disadvantage to the company from upgrading the calculators?
A)$20,000 advantage.
B)$8,800 advantage.
C)$8,000 disadvantage.
D)$18,000 disadvantage.

Question

Quizplus · Accepted Answer

If the calculators are upgraded, the total cost will be $26,800 + $10,000 = $36,800. The revenue from selling the upgraded calculators will be $30,000, which results in a net disadvantage of $6,800. On the other hand, if the calculators are sold in their current condition, the revenue will be $11,200, resulting in a net disadvantage of $15,600. Therefore, upgrading the calculators would be the best choice, as it results in a smaller net disadvantage of $6,800 compared to selling them in their current condition. The net advantage in upgrading is $30,000 - $36,800 = $8,800.

Reference: 09-02 Tolar Company Has 400 Obsolete Desk Calculators That Are Carried