Question2 James Thomas, the accounting supervisor of Liberty Hotel, is considering the purchase of a...
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Question2 James Thomas, the accounting supervisor of Liberty Hotel, is considering the purchase of a computer system for the back office. Two alternatives are being considered as follows: Cost Salvage value Expected useful life Utilities (annual) Operator labor (annual) Repairs (annual) Supplies (annual) $10,000 $1,000 3 years $1,000 $12,000 $2,000 3 years $800 $25,000 $1,000 $2,000 $25,000 $900 $2,000 Required: 1. Which costs are sunk, if any? 2. Which costs are irrelevant? 3. Prepare a comparative cost analysis for the two alternatives. Ignore the time value of money and taxes. Include only relevant costs. Which alternative do you recommend purchasing? Why? 4
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