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.
-Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?
A)$86.50
B)$887.50
C)$912.50
D)$562.50

Question

Quizplus · Accepted Answer

To determine the breakeven point, we need to find the cost of upgrading a computer.

Cost of upgrading a computer = selling price of upgraded computer – selling price of current computer 
Cost of upgrading a computer = $110 – $67.50 
Cost of upgrading a computer = $42.50

So, if the company sells the upgraded computers for $110, it earns an additional profit of $42.50 per computer.

Thus, to break even, the company needs to sell the upgraded computers for $67.50 + $42.50 = $110.

Therefore, the company would be as well off upgrading the computers if it sells them for $110.

Choice C ($912.50) is the only answer option that is closest to the breakeven selling price of $110.

Tawstir Corporation Has 800 Obsolete Personal Computers That Are Carried