1. Infinity Designs, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Home and Garden Expo. The exhibit will cost the company $12,000 for space. At the show, Infinity Designs will present a slide show on a PC, pass out brochures that are printed previously, (the company printed more than needed), and show its portfolio of previous jobs.

The company estimates that revenue will increase by $36,000 over the next year as a result of the exhibit. For the previous year, profit was as follows:

Revenue                              $201,000

                                Less:                     

                                Design supplies (variable cost)   $17,000

                                Salary of Samantha Spade (owner)          80,000  

                                Salary of Kim Bridesdale (full time employee)     55,000  

                                Rent      18,000  

                                Utilities 6,000    

                                Depreciation of office equipment            3,600    

                                Printing of advertising materials                700        

                                Advertising in Middleton Journal              2,500    

                                Travel expenses other than depreciation of autos (variable cost)              $2,400  

                                Depreciation of company cars    9,000

Calculate the impact of the exhibit on company profit.

2. Midwestern Sod Company produces two products: fescue grass and Bermuda grass

                                                                                          Fescue Grass             Bermuda Grass

Selling price per square yard                                             $3.00                              $3.85

Less variable cost per square yard                                         .83                                  1.55

(Water, fertilizer, maintenance)

The company has 130,000 square yards space available. In the past year, the company dedicated 65,000 square yards to fescue and 65,000 square to Bermuda grass. Annual fixed costs are $130,000, which the company allocates to products based on relative growing space. Martha Lopez, the chief financial officer of the Midwestern Sod, has suggested that in the coming year, all 130,000 square yards should be devoted to Bermuda grass. The President vetoed her suggestion, saying ‘'I know that right now home construction is booming in our area, and we can sell all the grass we can produce, irrespective of what type. But you know a lot of developers really like that fescue grass, and I'd hate to disappoint them by not offering it''

What is the opportunity cost of the President's decision to stick with both types of grass?