Question

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 $110,000, they can be sold for a total of $170,000. As an alternative, the calculators can be sold in their present condition for $50,000.

What is the financial advantage (disadvantage) to the company from upgrading the calculators?

A) $120,000

B) ($60,000)

C) $10,000

D) ($670,000)

Answer 1

Answer

Option C is correct : $ 10,000

Current sales value=$50,000

Incremental sales revenues from upgrading the calculators=($170,000-$1,10,000)=$60,000.

Hence financial advantage to the company would be =($60,000-$50,000)

$10,000(C).

The financial advantages to the company from upgrading the calculators is $10,000.