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Charlene Robers controls PARKCO, which owns and operates several parking garages in a large midwestern American city. Recently, the management of PARKCO has been investigating the viability of building a parking garage in an area of the city that has experienced rapid growth. Some years ago, PARKCO acquired the necessary land for $$425,000$ and demolished worthless buildings at the expense of $$72,000.$ Since then, the land has been rented by various construction companies as a temporary storage site for building majors while the construction companies have completed projects in the area. PARKCO has averaged revenue of $$5,000$ per year for this use of the property

Roberts is currently assembling financial information relating to the proposed garage. In addition to the information already presented, she received the following from the CFO, John Demming.

PARCO PROJECTIONS

Number of parking spaces in the proposed garage $840$

Number of parking spaces rented at the monthly rate $420$

The average number of parkers paying the daily rate $($for

Each of the $20$ business days per month$)180$

Fixed Costs to operate the garage per month: $$30,000.$

Roberts estimates the monthly variable cost of each monthly parker to be $$12$ and the price of a monthly parking space to be $$75.$ The estimated cost per daily parker is $$2,$ and the daily parking rate is expected to be $$8.$ The parking garage would operate $20$ business days per month.

Based on PRKCO$$s experience with similar garages, Robers believes the projected number of monthly and daily parkers was too high. When she questioned Demming, he replied,$$ This garage will be built no matter your experience. Just use the figures I gave you.

Based on this scenario, answer the following five questions in your writing paper:

$1)$ Define the concepts of sunk cost and opportunity cost.

$2)$ How are these two types of cost recorded in the accounting record?

$3)$ Identify the sunk costs and opportunity costs, if any, in the PRKCO scenario and show the amount of each

$4)$ Using the data in the scenario, calculate pre$-$tax operating income. Show your calculations.

$5)$ What are some other concerns that Roberts should consider with this scenario? How would you saddest they handle the concerns?

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