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Novak Corporation is comparing two different options. Novak currently uses Option 1, with revenues of $61,000 per year, maintenance expenses of $4,700 per year, and
Novak Corporation is comparing two different options. Novak currently uses Option 1, with revenues of $61,000 per year, maintenance expenses of $4,700 per year, and operating expenses of $24,400 per year. Option 2 provides revenues of $56,000 per year, maintenance expenses of $4,700 per year, and operating expenses of $20,700 per year. Option 1 employs a piece of equipment which was upgraded 2 years ago at a cost of $16,000. IF Option 2 is chosen, it will free up resources that will bring in an additional $4,000 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". (If amount decreases net income then enter the amount using either a negative sign preceding the numbereg. 45 or parentheses eg. (45)) Option 1 Option 2 Net Income Increase (Decrease) Sunk (S) Revenues $ 61000 56000 S > > Opportunity cost $
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