Tawstir Corporation has 400 obsolete personal computers that are carried in inventory at a total cost of $576,000. If these computers are upgraded at a total cost of $100,000, they can be sold for a total of $160,000. As an alternative, the computers can be sold in their present condition for $40,000. What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?

If the company upgrades the units, income will increase by $20,000 (compared to sell as-is).

Explanation:

Giving the following information:

Units= 400

If these computers are upgraded at a total cost of $100,000, they can be sold for a total of $160,000.

As an alternative, the computers can be sold in their present condition for $40,000.

We won't take into consideration costs before the upgrade, because they will remain in both options.

Sell as-is:

Effect on income= $40,000 increase

Continue processing:

Effect on income= 160,000 - 100,000= $60,000 increase

If the company upgrades the units, income will increase by $20,000 (compared to sell as-is).

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