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Kentsdale Corporation is comparing two different options. The company currently follows Option 1, with revenues of $180,000 per year, maintenance expenses of $10,000 per
Kentsdale Corporation is comparing two different options. The company currently follows Option 1, with revenues of $180,000 per year, maintenance expenses of $10,000 per year, and operating expenses of $48,000 per year. Option 2 provides revenues of $170,000 per year, maintenance expenses of $12,000 per year, and operating expenses of $42,000 per year. Option 1 employs a piece of equipment that was upgraded 2 years ago at a cost of $22,000. If Option 2 is chosen, it will free up resources that will increase revenues by $7,000. What will be the effect on net income when the company choose option 2? Ca. 52,000 Ob.-6,000 c. 1,000 d. 23,000
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