Question

Tannimen Square has 800 obsolete calculators in its inventory which have a cost of $16 each. If the calculators are reworked they could be sold for $23 each. If sold 'as-is', the revenue would be only $12 each. If Tannimen decides to rework the calculators, how much should the company be willing to invest to ensure that no additional loss occurs on the sale of the calculators?

Answer 1

Answer:

$8,800

Explanation:

It is given that the cost of production is $16 but of the calculators are to be sold as is (that is market value presently), it will go for $12.

So price at market= $12* 800 calculators

Market price= $9,600

If calculators are reworked= $23* 800 calculators

Reworked price= $18,400

Gain on reworking= Reworked price - Present market price

Gain on reworking= 18,400- 9,600

Gain on reworking= $8,800

So $8,800 or less should be spent on reworking to avoid further losses.