Garrison Boutique, a small novelty store, just spent $4,000 on a new software program that will help in organizing its inventory. Due to the steep learning curve required to use the new software, Garrison must decide between hiring two part-time college students or one full-time employee. Each college student would work 20 hours per week, and would earn $15 per hour. The full-time employee would work 40 hours per week and would earn $15 per hour plus the equivalent of $2 per hour in benefits. Employees are given two polo shirts to wear as their uniform. The polo-shirts cost Garrison $10 each. What are the relevant costs, relevant revenues, sunk costs, and opportunity costs for Garrison? OA. Relevant costs: benefits: $2 x 40 hours; uniforms: $10 x 2 shirts. Relevant revenues: None. Sunk costs: $4,000 for software. Opportunity costs: $4,000. OB. Relevant costs: benefits: $10 x 40 hours; uniforms: $2 x 2 shirts. Relevant revenues: Cannot be determined. Sunk costs: None. Opportunity costs: None. OC. Relevant costs: benefits: $2 x 40 hours; uniforms: $10 x 2 shirts. Relevant revenues: None. Sunk costs: $4,000 for software. Opportunity costs: None. OD. Relevant costs: benefits: $10 x 40 hours; uniforms: $2 x 2 shirts. Relevant revenues: Cannot be determined. Sunk costs: None. Opportunity costs: $4,000.
Garrison Boutique, a small novelty store, just spent $4,000 on a new software program that will help in organizing its inventory. Due to the steep learning curve required to use the new software, Garrison must decide between hiring two part-time college students or one full-time employee. Each college student would work 20 hours per week, and would earn $15 per hour. The full-time employee would work 40 hours per week and would earn $15 per hour plus the equivalent of $2 per hour in benefits. Employees are given two polo shirts to wear as their uniform. The polo-shirts cost Garrison $10 each. What are the relevant costs, relevant revenues, sunk costs, and opportunity costs for Garrison? OA. Relevant costs: benefits: $2 x 40 hours; uniforms: $10 x 2 shirts. Relevant revenues: None. Sunk costs: $4,000 for software. Opportunity costs: $4,000. OB. Relevant costs: benefits: $10 x 40 hours; uniforms: $2 x 2 shirts. Relevant revenues: Cannot be determined. Sunk costs: None. Opportunity costs: None. OC. Relevant costs: benefits: $2 x 40 hours; uniforms: $10 x 2 shirts. Relevant revenues: None. Sunk costs: $4,000 for software. Opportunity costs: None. OD. Relevant costs: benefits: $10 x 40 hours; uniforms: $2 x 2 shirts. Relevant revenues: Cannot be determined. Sunk costs: None. Opportunity costs: $4,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Garrison Boutique, a small novelty store, just spent $4,000 on a new software program that will help in organizing its inventory. Due to the steep learning curve required to use the
new software, Garrison must decide between hiring two part-time college students or one full-time employee. Each college student would work 20 hours per week, and would earn
$15 per hour. The full-time employee would work 40 hours per week and would earn $15 per hour plus the equivalent of $2 per hour in benefits. Employees are given two polo
shirts to wear as their uniform. The polo-shirts cost Garrison $10 each. What are the relevant costs, relevant revenues, sunk costs, and opportunity costs for Garrison?
OA. Relevant costs: benefits: $2 x 40 hours; uniforms: $10 × 2 shirts. Relevant revenues: None. Sunk costs: $4,000 for software. Opportunity costs: $4,000.
UB. Relevant costs: benefits: $10 x 40 hours; uniforms: $2 x 2 shirts. Relevant revenues: Cannot be determined. Sunk costs: None. Opportunity costs: None.
Oc. Relevant costs: benefits: $2 x 40 hours; uniforms: $10 x 2 shirts. Relevant revenues: None. Sunk costs: $4,000 for software. Opportunity costs: None.
Relevant costs: benefits: $10 x 40 hours; uniforms: $2 x 2 shirts. Relevant revenues: Cannot be determined. Sunk costs: None. Opportunity costs: $4,000.
OD.
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