Problem: Bauer Manufacturing Company, Inc. 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.
Question 1: The sunk cost in this situation is:
a $10,000
b $26,800
c $11,200
d $30,000
Question 2: What is the net advantage or disadvantage to the company from upgrading the calculators?
a $8,000 advantage
b $18,000 disadvantage
c $20,000 advantage
d $8,000 disadvantage