Question

Question 4                                                                                                           (Total: 14 marks)

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.

Required:

1. 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
Rent on the space occupied by the registration desk
Benefits from a new freezer
Cost of removing the old computer terminals
Cost of the new flat-panel displays
Wages of registration desk personnel
Cost of existing registration desk wiring

Answer 1

Item	Differential Cost	Opportunity Cost	Sunk Cost	None
Cost of the old computer terminals			✔
Rent on the space occupied by the registration desk	✔
Benefits from a new freezer				✔
Cost of removing the old computer terminals		✔
Cost of the new flat-panel displays	✔
Wages of registration desk personnel			✔
Cost of existing registration desk wiring			✔