Question

What is the net advantage or disadvantage to the company from upgrading the computer rather than selling them in their present condition?

1) Upgrade the computers and sell them for a total of $160,000
2) Sell the computers in their present condition for $50,000
3) Upgrade the computers and sell them for a total of $100,000
4) There is no advantage or disadvantage to the company from upgrading the computers

Answer 1

The net advantage to the company is highest when they upgrade the computers and sell them for a total of $160,000, with a net advantage of $156,800.

Step-by-step explanation:

To determine the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition, we need to compare the total revenue from each scenario with the total costs involved.

1. Upgrade the computers and sell them for a total of $160,000:
   Revenue = $160,000
   Cost = Fixed Cost + Marginal Cost for each computer
   = $250 + ($700 + $250 + $300 + $350 + $400 + $450 + $500)
   = $250 + $2950
   = $3200
   Net Advantage = Revenue - Cost
   = $160,000 - $3,200
   = $156,800
2. Sell the computers in their present condition for $50,000:
   Revenue = $50,000
   Net Advantage = Revenue - Cost
   = $50,000 - $0
   = $50,000
3. Upgrade the computers and sell them for a total of $100,000:
   Revenue = $100,000
   Cost = $3200
   Net Advantage = Revenue - Cost
   = $100,000 - $3,200
   = $96,800
4. There is no advantage or disadvantage to the company from upgrading the computers, so the Net Advantage is $0.

Based on the calculations, we can see that the net advantage to the company is highest when they upgrade the computers and sell them for a total of $160,000, with a net advantage of $156,800.