THE FOLLOWING INFORMATIO APPLIESTOQUEST?ONS 17 THROUGH 18. Bauer Manufacturing C

Question

THE FOLLOWING INFORMATIO APPLIESTOQUEST?ONS 17 THROUGH 18. Bauer Manufacturing Company, Inc. has 400 obsolete desk calculators that are carried in inventory at a total cost of $26,800. If these calculators are upgraded at a total cost of $10,000, they can be sold for a total of $30,000. As an alternative, the calculators can be sold in their present condition for $11,200. 17. The sunk cost in this situation is: a. $10,000. b. $26,800. c. $11,200. d. $30,000. 18. What is the net advantage or disadvantage to the company from upgrading the calculators? a. $8,800 advantage. b. $18,000 disadvantage. c. $20,000 advantage. d. $8,000 disadvantage. 19. The is the discount rate that equates the present value of a project's cash inflows with the present value of the project's cash outflows a. Net present value. b. Payback period. c. Internal rate of return. d. Return on investment.

Explanation / Answer

Existing Cost 26800 Existing Sales Price 11200 Upgradation Cost 10000 Revised Sales Price 30000 17 Sunk Cost are the past costs which is not relevant to decision. Already Incurred cost is 26800/- Existing Cost 26800 Sunk Cost B 18 Existing Cost 26800 Existing Sales Price 11200 Net Gain in Present 11200 (Cost impact not taken since 26800 is sunk cost) Revised Sales Price 30000 Upgradation Cost 10000 Net Gain in Revised 20000 Net Advantage 8800 (Revised-Current Gain) A 19 Net Present is the net result from the Present Value of Cash Inflows less Present Value of Cash Outflows. A

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