Reference: 09-02 Tolar Company Has 400 Obsolete Desk Calculators That Are Carried

question 33

Multiple Choice

Reference: 09-02
Tolar Company has 400 obsolete desk calculators that are carried in inventory at a total cost of $26,800. If these calculators are upgraded at a total cost of $10,000, they can be sold for a total of $30,000. As an alternative, the calculators can be sold in their present condition for $11,200.
-What is the net advantage or disadvantage to the company from upgrading the calculators?

• A)$20,000 advantage.
• B)$8,800 advantage.
• C)$8,000 disadvantage.
• D)$18,000 disadvantage.

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Definitions:

Market Price

The ongoing rate at which an asset or service is offered for buying or selling in a certain market.

Short Run

A period in economics during which at least one input or resource is fixed, limiting immediate capacity adjustments.

Zero Economic Profit

A condition in which a firm's total revenue equals its total costs, implying normal profit but no excess profit over what is considered normal in the industry.

Long Run

A period in economics where all factors of production and costs are variable, and firms can adjust all inputs as needed.