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T is being approached by a customer P
P would need a computerised control system called ‘swipe 2’. The current market price of swipe 2 is $10,800, although T has an older version of the system, ‘swipe 1’ in inventory, which could be modified at a cost of $4,600. T Co paid $5,400 for Swipe 1 when it ordered it in error two months ago and has no other uses for it. The current market price of Swipe 1 is $5,450, although if T Co tried to sell the one they have, it would be deemed to be ‘used’ and therefore only worth $3,000
-The answer is $7600.
-Could you help me to get the answer?They have the choice of either buying Swipe 2 (and paying 10,800) or using Swipe 1 and modifying it.
If they use Swipe 1, the there is an opportunity cost of 3,000 (what they could have got by selling it) and also the cost of modifying it which is 4,600. So a total cost of 7,600.
They would choose the cheapest at a cost of 7,600.
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