Differential, Opportunity, and Sunk Costs
The Sorrento Hotel is a four-star hotel located in downtown Seattle. The hotel’s operations vice president would like to replace the hater s antiquated computer terminals at the registration desk with attractive state-of-the-art flat-panel displays. The new displays would take less space, would consume less power than the old computer terminals, and would provide additional security since they can only be viewed from a restrictive angle. The new computer displays would not require any new wiring. The haters chef believes the funds would be better spent on a new bulk freezer for the kitchen.
Required:
For each of the items below, indicate by placing an X in the appropriate column whether it should be considered a differential cost. an opportunity cost, or a sunk cost in the decision to replace the old computer terminals with new flat-panel display s. If none of the categories apply for a particular item. leave all columns blank.
Item | Differential Cost | Opportunity Cost | Sunk Cost |
Ex. Cost of electricity to run the terminals……………………… | X |
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1. Cost of the new flat-panel displays………………………… |
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2. Cost of the old computer terminals………………………… |
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3. Rent on the space occupied by the registration desk……… |
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4. Wages of registration desk personnel……………………… |
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5. Benefits from a new freezer……………………………… |
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6. Costs of maintaining the old computer terminals…………… |
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7. Cost of removing the old computer terminals……………… |
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8. Cost of existing registration desk wiring…………………… |
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