1-1. Tawstir Corporation has 600 obsolete personal computers that are carried in inventory at a total cost of $864,000. If these

computers are upgraded at a total cost of $200,000, they can be sold for a total of $260,000. 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?

$220,000 advantage

$20,000 advantage

$660,000 disadvantage

$60,000 advantage

1-2. Eley Corporation produces a single product. The cost of producing and selling a single unit of this product at the

company's normal activity level of 47,000 units per month is as follows:

Direct materials	$46.10
Direct labor	$8.80
Variable manufacturing overhead	$1.80
Fixed manufacturing overhead	$18.70
Variable selling & administrative expense	$3.20
Fixed selling & administrative expense	$15

The normal selling price of the product is $100.10 per unit.

An order has been received from an overseas customer for 2,700 units to be delivered this month at a special

discounted price. This order would have no effect on the company's normal sales and would not change the total

amount of the company's fixed costs. The variable selling and administrative expense would be $1.90 less per

unit on this order than on normal sales.

Direct labor is a variable cost in this company.

Suppose there is ample idle capacity to produce the units required by the overseas customer and the special

discounted price on the special order is $83.40 per unit. By how much would this special order increase (decrease)

the company's net operating income for the month?

$(43,000)

$18,090

$68,580

$(27,540)