Question
Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $51,000 per year, maintenance expenses of $3,900 per
Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $51,000 per year, maintenance expenses of $3,900 per year, and operating expenses of $20,300 per year. Option 2 provides revenues of $47,000 per year, maintenance expenses of $3,900 per year, and operating expenses of $17,200 per year. Option 1 employs a piece of equipment which was upgraded 2 years ago at a cost of $13,000. If Option 2 is chosen, it will free up resources that will bring in an additional $3,000 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". (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Option 1 | Option 2 | Net Income Increase (Decrease) | Sunk (S) | |||||
Revenues | $ | $ | $ | S or NA | ||||
Maintenance expenses | S or NA | |||||||
Operating expenses | S or NA | |||||||
Equipment upgrade | S or NA | |||||||
Opportunity cost | S or NA | |||||||
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