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Colin Lim of Settlers Cafe is introduced in the chapter's opening feature. In order to diversify his business. Colin is considering two proposals (all $
Colin Lim of Settlers Cafe is introduced in the chapter's opening feature. In order to diversify his business. Colin is considering two proposals (all $ are annual amounts). Colin would begin selling boardgames online directly to customers through his Website. Online customers would use their credit cards. Settlers Cafe currently has the capability of selling through its Website with no additional investment in hardware or software. Credit sales are expected to be $25,000. Costs associated with this plan are as follows: cost of these sales will be $13, 550, credit card fees will be 5% of sales, and additional recordkeeping and shipping costs will be 6% of sales. Colin would expand his market by opening more cafes. He would make additional sales of $50,000 in these cafes. Costs associated with those sales are as follows: cost of sales will be $34,000, additional recordkeeping expenses will be 6% of sales, and new fixed annual expenses will be $5,000. Compute the additional annual net profit or loss expected under (a) Plan A and (b) Plan B. Should Colin pursue either plan? Discuss both the financial and nonfinancial factors relevant to this decision
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