The Tolar Corporation 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.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) $8 per calculator
B) $30 per calculator
C) $53 per calculator
D) $67 per calculator

Question

Quizplus · Accepted Answer

If Tolar sells the calculators in their present condition, they will receive $11,200. If they upgrade the calculators, it will cost them an additional $10,000, making their total cost $36,800. However, they will be able to sell the upgraded calculators for $30,000.

To find the selling price per unit that would make the two options equally profitable, we can set up the equation:

Selling Price per Unit x Number of Units = Total Revenue

In the case where they sell the calculators in their present condition:

$11,200 ÷ 400 calculators = $28 per calculator

In the case where they upgrade and sell the calculators:

$30,000 - $36,800 = -$6,800 loss

We can see that in this case, they will not make a profit no matter what the selling price per unit is because the cost of upgrading the calculators is too high.

Therefore, the best choice is to sell the calculators in their present condition for $11,200.

The Tolar Corporation Has 400 Obsolete Desk Calculators That Are