(TCO 3)Cindy's Limo Service provides transportation services in and around Middleville. Its profits have been declining, and management is planning to add a package delivery service that is expected to increase revenue by $275,000 per year. The total cost to lease additional delivery vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise all services. Due to expansion, however, the labor costs and utilitieswill increase by 40%. Rent and other costs will increase by 15%.

Cindys Limo Service

Annual Income Statement

Before Expansion

Sales revenue

$960,000

Costs:

Vehicle leases

400,000

Labor

290,000

Utilities

50,000

Rent

100,000

Other costs

60,000

Managers salary

120,000

Total costs

$1,020,000

Operating profit (loss)

$(60,000)

What are the total differential costs thatwill be incurred as a result of the expansion?

$60,000

$220,000

$196,000

$211,000