A few weeks back a friend of Barry, Ray Sellsit a local realtor mentioned that a larger manufacturing facility in nearby Kingsville is available for long-term lease. The facility is larger but Barry estimates that the utility costs will be lower because it is more modern and energy efficient. Potential benefits to this new facility will that WCI will not have to pay property taxes or building insurance since it will not own the building. The lease would be considered and operating lease, so it can be fully expensed. Due to the size of the facility, it is estimated by Barry they could sublet 20% of the facility for the next five (5) years until it can take over the whole facility. Ray believes that selling the existing facility in Harrow should not be a problem, who he has a few clients that may want the facility. The current facility is not fully depreciated and Barry believe it could help the bottom line as depreciation expense will not be charged. A possible other benefit of selling the existing facility is that WCI will no longer incur repair and maintenance costs, or the salary of a building maintenance manager, who would be terminated if they decide to lease this new building. All maintenance costs will be paid by the owner, unless the repairs are the result of damage caused by WCI in which the costs would be responsible for those costs. The insurance on the inventory, equipment and security will not change if WCI decides to move to the new warehouse. One potential drawback is if the sell the existing facility, WCI will no longer earn operating income for the parking lot, which WCI rented to an adjacent company. The company made a small profit each year after all expenses associated with the parking lot. Required:

a) Identify the differential revenues and costs related to keeping the existing facility in Harrow versus renting the new facility in Kingsville. b) Are there any opportunity costs associated with selling the old facility? c) What kind of cost is the depreciation expense on the old facility? Should it be considered in deciding whether to stay in the existing building or rent the new facility? Why or why not?

I don't understand the depreciation expense also the following is my answer for a and b not sure I am correct

	Old Facility Harrow Owned	New Facility Kingsville To be Leased
Utility Cost		Less than Harrow	Differential Cost
Property Tax	Yes	No	Differential Cost
Building Insurance	Yes	No	Differential Cost
Sublet Revenue	No	Yes	Differential Revenue
Depreciation Expense	Yes	Nil	Differential Cost
Repair/Maintenance Building Cost	Yes	Nil	Differential Cost
Maintenance Manager Salary	Yes	Nil	Opportunity
Operating income renting parking lot	Yes	Nil	Opportunity