5. 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 $120,000, they can be sold for a total of $180,000. 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?

a. $140,000 advantage

b. $20,000 advantage

c. $580,000 disadvantage

d. $60,000 advantage

6. The management of Kabanuck Corporation is considering dropping product V41B. Data from the company's accounting system appear below:

Sales	$926,000
Variable expenses	$405,000
Fixed manufacturing expenses	$340,000
Fixed selling and administrative expenses	$247,000

All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $207,000 of the fixed manufacturing expenses and $118,000 of the fixed selling and administrative expenses are avoidable if product V41B is discontinued.

According to the company's accounting system, what is the net operating income earned by product V41B? Include all costs in this calculationwhether relevant or not.

a. $66,000

b. $(521,000)

c. $(66,000)

d. $521,000

7. 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 45,000 units per month is as follows:

Direct materials	$45.10
Direct labor	$8.60
Variable manufacturing overhead	$1.60
Fixed manufacturing overhead	$18.30
Variable selling & administrative expense	$2.80
Fixed selling & administrative expense	$13

The normal selling price of the product is $96.10 per unit.

An order has been received from an overseas customer for 2,500 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 $1.70 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 $81.40 per unit. By how much would this special order increase (decrease) the company's net operating income for the month?

a. $(35,000)

b. $16,750

c. $62,500

d. $(20,000)