5. Tawstir Corporation has 500 obsolete personal computers that are carried in i

Question

5. Tawstir Corporation has 500 obsolete personal computers that are carried in inventory at a total cost of $720,000. If these computers are upgraded at a total cost of $110,000, they can be sold for a total of $170,000. As an alternative, the computers can be sold in their present condition for $50,000. What is the net advantage or disadventage to the company from upgrading the computers rather than selling them in their present condition? $60,000 advantage O $10,000 advantage $670,000 disadvantage O$120,000 advantage

Explanation / Answer

Present realisation without upgrading = 50000

Realisation after upgrading = 170000

Costs incurred in upgrading = 110000

- Net benefit after upgradation = 170000 - 110000 = 60000

Bet incremental benefit= 60000 - 50000 = 10000 advantage

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