The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost...
Question:
The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of $100,000, they can be sold for a total of $160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000.
What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?
a. $110,000 advantage
b. $660,000 disadvantage
c. $10,000 advantage
d. $60,000 advantage
Incremental Analysis:
Incremental analysis is performed so that the management can decide whether or not to accept a proposal. In the incremental analysis, incremental costs are compared with the incremental income to compute the net incremental income. In case, the net incremental income is a positive value, the proposal is financially acceptable.
Answer and Explanation: 1
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View this answerComputation of the Net Incremental Income from Upgrading the Computer:
| Particulars | Amount ($) |
| Incremental Income: | |
| Revenue from sale after upgrading... |
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