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Do It! Review 20-1

Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $59,000 per year, maintenance expenses of $4,500 per year, and operating expenses of $23,400 per year. Option 2 provides revenues of $54,000 per year, maintenance expenses of $4,500 per year, and operating expenses of $19,800 per year. Option 1 employs a piece of equipment which was upgraded 2 years ago at a cost of $15,000. If Option 2 is chosen, it will free up resources that will bring in an additional $3,500 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".

Option 1

Option 2

Net Income

Increase (Decrease) Sunk (S)

Revenues $ $ $

Maintenance expenses

Operating expenses

Equipment upgrade

Opportunity cost

$

Do It! Review 20-1 Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $59,000 per year, maintenance expenses of $4,500 per year, and operating expenses of $23,400 per year. Option 2 provides revenues of $54,000 per year, maintenance expenses of $4,500 per year, and operating expenses of $19,800 per year. Option 1 employs a piece of equipment which was upgraded 2 years ago at a cost of $15,000. If Option 2 is chosen, it will free up resources that will bring in an additional $3,500 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". Net Income Increase (Decrease) Option 1 Option 2 Sunk (S) Revenues Maintenance expenses Operating expenses Equipment upgrade Opportunity cost Click if you would like to Show Work for this questions Open Shew Work

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