If Pizza For Everyone replaces the existing delivery van with the new one, over the next 10 years operating income will:
A)decrease by $90,000
B)increase by $75,000
C)decrease by $75,000
D)None of these answers is correct.

Question

Quizplus · Accepted Answer

The question states that the new van will have annual operating expenses of $5,000 less than the current van. Over the course of 10 years, this amounts to a total savings of $50,000 ($5,000 x 10 years). Therefore, if Pizza For Everyone replaces the existing van with the new one, their operating income will increase by $75,000 ($50,000 savings + $25,000 increase in revenue).

If Pizza for Everyone Replaces the Existing Delivery Van with the New