How do you solve this? Is there a formula I need to know?

How do you solve this? Is there a formula I need to know? I'm not just looking for the answers because I have other problems similar to this question.

Hi-Tech Inc. has several outdated computers that cost a total of $17,800 and could be sold as scrap for $4,600. They could be updated for an additional $2,400 and sold. If Hi-Tech updates the computers and sells them, net income will increase by $9,000. At what price were the updated versions sold? Entry field with incorrect answer now contains modified data

$26,800

$13,200

$16,000

$13,600

1 Answer

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  • 5 years ago
    Favorite Answer

    There is no "textbook" formula to memorize, you're supposed to work it out with logic.

    (1) sell as scrap: get $4,600

    (2) update for $2,400, sell for ________, net income increase by $9000 (over the $4,600 the company would have gotten as scrap).

    Therefore, with option (2), the company gets +2,400 (to recover the update costs) +4,600 (to match option 1) + 9,000 (for the net income increase).

    • Thank you for explaining it to me. I guess I was over thinking, but I understand it now. Thank you again.

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