Electronics Inc. sells personal computers and accessories. The company would like to expand its product offerings beyond personal computers and has identified two possibilities— digital cameras and portable projection systems. Annual sales of digital cameras are expected to total \($200,000,\) with costs for the cameras of \($165,000.\) Additional training costs for sales staff of \($10,000\) a year will be incurred if the digital cameras are sold. Annual sales of projection systems are expected to total \($450,000,\) with costs for the systems of \($400,000.\) Additional training costs for sales staff of \($8,000\) a year will be incurred if projection systems are sold. Regardless of the alternative selected, Electronics Inc. will no longer use store display equipment purchased last year for \($2,000.

Required

a. What is the opportunity cost of selecting digital cameras over portable projection systems?

b. What is the opportunity cost of selecting portable projection systems over digital cameras?

c. Using the format in Table 1.4, perform differential analysis to determine which alternative is more profitable, and by how much.

d. Is the \($2,000\) spent on display equipment last year important in deciding which option to choose? Explain.

e. Explain how planning and control could be used to evaluate the profitability of the alternative selected in part c.