The Tolar Corporation has 500 obsolete desk calculators that are carried in inventory at a total cost of $720,000. If these calculators are upgraded at a total cost of $190,000, they can be sold for a total of $250,000. As an alternative, the calculators can be sold in their present condition for $50,000.Assume that Tolar decides to upgrade the calculators. At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition?
A) $190 per calculator
B) $770 per calculator
C) $480 per calculator
D) $390 per calculator

Question

Quizplus · Accepted Answer

The company would be as well off if it sold the calculators in their present condition for $50,000 as it would be if it upgraded them and sold them for a total of $250,000. The total cost of upgrading the calculators is $190,000, so the company would need to sell the calculators for a total of $250,000 + $190,000 = $440,000 to break even. This means that the company would need to sell each calculator for $440,000 / 500 = $880. Since the company can only sell the calculators for a total of $250,000, it would be better off selling them in their present condition for $50,000.

The Tolar Corporation Has 500 Obsolete Desk Calculators That Are