Joseph Giovine Owns a Successful Hole-In-The-Wall Bagel Shop Called Peach

Essay

Joseph Giovine owns a successful hole-in-the-wall bagel shop called Peach Tree Bagels.Joseph wants to expand the shop by leasing the space next door for $1,000 per month and adding tables and chairs so that customers can dine in.He figures that the tables and chairs will cost $5,000 and that the bagel machine,which cost $4,500 five years ago,will have to be scrapped in favour of a larger machine costing $7,400.He thinks sales will increase by $5,500 per month.Variable costs are 55% of sales.
A. What are the relevant costs and benefits of expanding into the new space?
B. What are the irrelevant costs and benefits of expanding into the new space?