Exercise C: Pertinent Costs (Differential Costs), of opportunity (portunity) and sunk (Value: 7 points)

Juan Gonzlez owns a small condominium with 8 apartments on the coast, very close to a beach and a tourist area. The condominium has a laundry room with 3 washers and 3 electric dryers on the first floor and the owner wants to replace the old washers and dryers with new ones that will save water and energy since they would be gas dryers. The condominium manager suggests that it would be better to invest the money in a living room that is available as an entertainment area and put a large television, a pool table and a ping-pong table to attract more customers. For each of the following cost items, indicate what type of cost would be considered: Relevant cost (CP), opportunity costs (OC) or sunk costs (IC). If no category applies, write N/A.

Cost of new washing machines Electricity and water cost of new washing machines Maintenance cost of old washers and dryers Benefits of the entertainment room Cost to remove old washers and dryers Entertainment room maintenance Preparation costs and equipment of the new entertainment room