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Eva pays $3,000 per month to rent her house. She has a garage but is considering turning the space into a hair styling studio.

 

Eva pays $3,000 per month to rent her house. She has a garage but is considering turning the space into a hair styling studio. She expects to earn $3,000 a month from this new business. Instead, she could sublease the garage space to a neighbor for $800 per month. As part of the terms of sublease, her neighbor will pay an additional $100 per month for utilities. All other costs are unaffected. Eva is now analyzing the costs and benefits of these alternatives. Help Eva in her analysis by identifying the following items as either a relevant cost or irrelevant cost in the decision. 1. The rent paid on the house 2. The earnings from the hair styling studio 3. The cost of home insurance 4. The cost of utilities 5. The monthly income from renting the garage

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