The Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total cost of $576,000. 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 $40,000.What is the financial advantage (disadvantage) to the company from upgrading the calculators?
A) $130,000
B) ($570,000)
C) $20,000
D) ($60,000)

Question

Quizplus · Accepted Answer

The financial advantage of upgrading is calculated by comparing the net proceeds from selling the calculators after upgrading to the net proceeds from selling them without upgrading. Upgrading costs $110,000 and the calculators can then be sold for $170,000, resulting in a net gain of $60,000 ($170,000 - $110,000). Without upgrading, the calculators can be sold for $40,000. Therefore, the financial advantage of upgrading is $20,000 ($60,000 - $40,000).

The Tolar Corporation Has 400 Obsolete Desk Calculators That Are