An administrator at Riverview Hospital is considering how to
use some space made available when the outpatient clinic moved to a new building.
She has narrowed her choices as follows:
a. Use the space to expand laboratory testing. Expected future annual
revenue would be $320,000; future costs, $290,000.
b. Use the space to expand the eye clinic. Expected future annual revenue
would be $500,000; future costs, $480,000.
c. The gift shop is rented by an independent retailer who wants to expand
into the vacated space. The retailer has offered an $11,000 early rental
for the space. All operating expenses will be borne by the retailer.
The administrator’s planning horizon is unsettled. However, she has
decided that the yearly data given will suffice for guiding her decision.
Tabulate the total relevant data regarding the decision alternatives. Omit
the concept of opportunity cost in one tabulation, but use the concept in a second
tabulation. As the administrator, which tabulation would you prefer if you
could receive only one?