The large investment the company made in the failed project most likely was made by a manager who did not fully understand "Sunk Costs".
<h3>What is Sunk Cost?</h3>
An price or investment that has already been made and cannot be recovered is referred to as a sunk cost.
Types of sunk cost are -
- Investment in advertising. This money is lost if you advertise a new product; it cannot be recovered.
- Investigation into a new product.
- Labour expenses.
- New software system installation and operational procedures.
- Loss of relationships in business and reputation.
Therefore, Sunk expenses are unrelated to any particular occurrence and shouldn't be taken into account while choosing an investment or project.
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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.
I would ask what is wrong with our current packaging? Why are we making revisions?
Also, what gain would be brought to the table with this new packaging?
Answer: $13,063,000
Explanation:
The book value of Klingon's assets today will be:
Net working capital = $223,000
Add: Current liabilities = $840,000
Current assets = $1,063,000
Add: Net fixed asset = $12,000,000
Book value of assets = $13,063,000
Therefore, the book value of the assets will be $13,063,000.
Car salespersons are notorious for using the lowball technique, which involves changing terms after an agreement has been made.
