heffield Corp. has several outdated computers that cost a total of $19400 and could be sold...

heffield Corp. has several outdated computers that cost a total of $19400 and could be sold as scrap for $6000. They could be updated for an additional $2500 and sold. If Sheffield updates the computers and sells them, net income will increase by $9000. What amount would be considered sunk costs? $19,400

Expert Solution

Sunk cost means, the cost which has been already incurred.

It can be stated as a historical cost.

In this question Sunk ckst is $19,400.

According to the given information,

Cost of the Outdated computers = $,19,400

Scrap value = $6,000

Increase in net income = $9,000

If High-tech computers are updated, then net income will increase by $9,000

If the computers are updated, then the scrap value will be the forgone cost which is also called the opportunity cost.

Hence, this cost must be added to the additional cost to determine the selling price.

We know that the selling price is calculated as

Selling price = Cost +Net income

=

(6000+2500)+9000

17500

ekkarill92 answered 3 years ago

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