Do It! Review 20-1

Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $78,000 per year, maintenance expenses of $6,000 per year, and operating expenses of $31,200 per year. Option 2 provides revenues of $72,000 per year, maintenance expenses of $6,000 per year, and operating expenses of $26,400 per year. Option 1 employs a piece of equipment which was upgraded 2 years ago at a cost of $20,000. If Option 2 is chosen, it will free up resources that will bring in an additional $5,000 of revenue. Complete the following table to show the change in income from choosing Option 2 versus Option 1. Designate Sunk costs with an S otherwise select "NA".

Net Income Increase (Decrease) Option 1 Option 2 Sunk (S) Revenues $ Maintenance expenses Operating expenses Equipment upgrade Opportunity cost $