1. Compute the additional annual net income or loss expected under (a) Plan A and (b) Plan B. Include your work and your solution to both plans.

2. Should the company pursue either plan? Discuss your opinion regarding the financial and non-financial factors relevant to your decision.

Plan A. The company would begin selling access to a premium version of its website. The new online customers would use their credit cards. The company has the capability of selling the premium service with no additional investment in hardware or software. Annual credit sales are expected to increase by $248,000. Costs associated with Plan A: Additional wages related to these new sales are $135,700; credit card fees will be 4.75% of sales; and additional record keeping costs will be 6% of sales. Premium service sales will reduce advertising revenue by $8,550 annually because some customers will now only use the premium service. Plan B. The company would begin selling merchandise. It would make additional annual credit sales of $502,000. Costs associated with Plan B: Cost of these new sales is $374,000. Record keeping and shipping costs will be 4.0% of sales; and uncollectible accounts will be 6.2% of sales