Owen T Corporation is comparing two different options. The company currently operates under Option 1, with revenues of $80,000 per year, maintenance expenses of $5,000 per year, and operating expenses of $38,000 per year. Option 2 provides revenues of $80,000 per year, maintenance expenses of $12,000 per year, and operating expenses of $32,000 per year. Option 1 employs a piece of equipment that was upgraded 2 years ago at a cost of $22,000. If Option 2 is chosen, it will free up resources that will increase revenues by $3,000. Complete the following table to show the change in income from choosing Option 2 versus Option 1. Designate any sunk costs with an "S."
Owen T Corporation is comparing two different options. The company currently operates under Option 1, with revenues of $80,000 per year, maintenance expenses of $5,000 per year, and operating expenses of $38,000 per year. Option 2 provides revenues of $80,000 per year, maintenance expenses of $12,000 per year, and operating expenses of $32,000 per year. Option 1 employs a piece of equipment that was upgraded 2 years ago at a cost of $22,000. If Option 2 is chosen, it will free up resources that will increase revenues by $3,000. Complete the following table to show the change in income from choosing Option 2 versus Option 1. Designate any sunk costs with an "S."
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bt.2.
Transcribed Image Text:Owen T Corporation is comparing two different options. The company currently
operates under Option 1, with revenues of $80,000 per year, maintenance
expenses of $5,000 per year, and operating expenses of $38,000 per year.
Option 2 provides revenues of $80,000 per year, maintenance expenses of
$12,000 per year, and operating expenses of $32,000 per year. Option 1
employs a piece of equipment that was upgraded 2 years ago at a cost of
$22,000. If Option 2 is chosen, it will free up resources that will increase
revenues by $3,000.
Complete the following table to show the change in income from choosing
Option 2 versus Option 1. Designate any sunk costs with an "S."
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