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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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Computation of the Net Incremental Income from Upgrading the Computer:

Particulars Amount ($)
Incremental Income:
Revenue from sale after upgrading...

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Incremental Analysis: Definition & Examples

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Chapter 9 / Lesson 7
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Learn about incremental analysis. Understand what incremental analysis is, learn the applications of incremental analysis, and see examples of incremental analysis.


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