Computer Terminals

Question

Last month Mont Tremblant Biking, a mountain sporting goods retailer, had total sales of $3,200,000, selling expenses of $110,000, and administrative expenses of $470,000. The company had beginning merchandise inventory of $140,000, purchased additional merchandise inventory for $2,550,000, and had ending merchandise inventory of $180,000.

Prepare an income statement for the company for the month.

Question

The Trump International Hotel & Tower is a five-star hotel located in downtown Toronto. The hotel’s operations vice president would like to replace the hotel’s legacy computer terminals at the registration desk with attractive state-of-the-art flat-panel displays. The new displays would take less space, consume less power than the old computer terminals, and provide additional security since they can be viewed only from a restrictive angle. The new computer displays would not require any new wiring. However, the hotel’s chef believes the funds would be better spent on a new bulk freezer for the kitchen.

Classify each item as a differential cost, an opportunity cost, or a sunk cost in the decision to replace the old computer terminals with new flat-panel displays. If none of the categories apply for a particular item, select “None.”

Item

Differential Cost

Opportunity Cost

Sunk Cost

None

Cost of the old computer terminals

Cost of existing registration desk wiring

Rent on the space occupied by the registration desk

Wages of registration desk personnel

Benefits from a new freezer

Costs of maintaining the old computer terminals

Cost of removing the old computer terminals

Cost of the new flat-panel displays