Tawstir Corporation has 800 obsolete personal computers that are carried in inventory at a total cost of $1, 100, 000.If these computers are upgraded at a total cost of $40, 000, they can be sold for a total of $750, 000.As an alternative, the computers can be sold in their present condition for $690, 000. What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?
A)$20, 000 advantage
B)$20, 000 disadvantage
C)$60, 000 advantage
D)$60, 000 disadvantage

Question

Quizplus · Accepted Answer

The net advantage of upgrading is calculated by comparing the net proceeds from selling after upgrading versus selling as-is. Upgrading costs $40,000 and results in a sale of $750,000, giving net proceeds of $710,000 ($750,000 - $40,000). Selling as-is gives $690,000. The net advantage of upgrading is $710,000 - $690,000 = $20,000.

Tawstir Corporation Has 800 Obsolete Personal Computers That Are Carried