1. Exercise 1-14 Homework- exercise 1-14 | Opportunity cost - Parrish Plumbing | Incremental revenue (52 x $2,500) | | $ 130,000 | Less Incremental costs per year | | | labor | | | | $ 36,400 | | parts | | | | $ 26,000 | | transportation | | | | $ 5,200 | | office stuff | | | | $ 10,400 | | | | | | | $ 78,000 | Incremental profit/ opportunity cost | | | | | $ 52,000 |

The cost of rent and the cost of depreciation of office equipment are not taken into consideration in the above calculations because they belong to the group of fixed costs, meaning that their level remains constant regardless of increase or decrease of business activities.

2. Problem 1-2 Homework- problem 1-2 | Incremental analysis - Santiago's Salsa | Current production of 325,000 per month at $5.00 | | | | | Per Jar of Salsa | Annually | Ingredient cost | | | | $ 1.25 | $ 406,250 | Labor cost | | | | $ 2.08 | $ 677,083 | | | | | Per month | Annually | Rent | | | | $ 5,000.00 | $ 60,000 | Depreciation | | | | $ 6,000.00 | $ 72,000 | Other | | | | $ 1,000.00 | $ 12,000 | Total current costs | | | | | $ 1,227,333 | | | | | | | Current revenue | | | | $ 5.00 | $ 1,625,000 | Current profit | | | | | $ 397,667 | | | | | | | Future production of 375,000 per month at $4.60 | | | | | Per Jar of Salsa | Annually | Ingredient cost | | | | $ 1.25 | $ 468,750 | Labor cost | | | | $ 2.08 | $