he Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total...

he Tolar Corporation has 400 obsolete desk calculators that are carried in inventory at a total cost of $576,000. If these calculators are upgraded at a total cost of $150,000, they can be sold for a total of $210,000. As an alternative, the calculators can be sold in their present condition for $40,000.

Assume that Tolar decides to upgrade the calculators. At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition?

Expert Solution

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Tolar

Sunk cost are those costs which are already incurred.

In the present case sunk cost is the cost of obsolete inventory i.e. $ 576,000.

If Tolar will sale now then it will get $ 40,000.

So if the company wants to well off as if it just sold the calculators in their present condition or upgrade it should sell in upgrade costs+ sale value in present condition.

So sale value should be $ 150,000 (upgrade costs) + $ 40,000 (sale value of present condition)= $ 190,000.

Sale value	190,000.00
Units	400.00
Sell price	475.00
So sell price should be $ 475 per unit.

ekkarill92 answered 1 year ago

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