Use the following data for Tingey company for questions 2325

Use the following data for Tingey company for questions 23-25 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. 23. The sunk cost in this situation is: A) $720,000 B) $160,000 C) $50,000 D) $100,000 24. 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 25. Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition? A) $100 B) $770 C) $300 D) $210 26. Danneman Corporation\'s fixed monthly expenses are $13,000 and its contribution margin ratio is 56%. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company\'s net operating income in a month when sales are $41,000? A) $9,960 B) $5,040 C) $22,960 D) $28,000

Solution

ans 23 The sunk cost is Option A $720000 In this scenerio the origianl cost is the sunk cost. Ans 24 Process further Sale Difference Revenue $50,000 160000 Les: cost to upgrade $0 100000 Net Revenue $50,000 $60,000 $10,000 Option c $10000 advantage to upgrade and than sell ans 25 The net benefit which we want is $50000 hence sales price should be ($50000+$100000)=$150000 No. of pieces 500 Selling price=150000/500 $300 Option C $300 is correct ans 26 Net operating income Contribution-Fixed expenses (41000*56%)-13000 9960 Option A $9960 If any doubt please comment. If satisfied you can rate