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 $140,000, they can be sold for a total of $200,000. 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?

Answer 1

Answer:

It is more profitable to upgrade the calculators.

Explanation:

Giving the following information:

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 $140,000, they can be sold for a total of $200,000. As an alternative, the calculators can be sold in their present condition for $50,000.

We need to determine whether it is more convenient to upgrade the calculators or sell them as they are.

Upgrade:

Effect on income= 200,000 - 720,000 - 140,000= -$660,000

Not upgrade:

Effect on income= 50,000 - 720,000= -$670,000

It is more profitable to upgrade the calculators.