Incremental Analysis: If production does increase dramatically after their presentation on Shark Tank, the Lees will need more space for production.
They have two options. Option 1 is to rent out a spacious warehouse nearby.
If they pursue this option, there rent will be $1,200 per month and utilities are estimated to cost an additional $350 per month.
Their second option, Option 2, is to rent a smaller storefront space that is also nearby.
The storefront rent is $1350 per month.
However, utilities will likely only cost an additional $150 per month.
They want to compare their options over one year's time (since each rental contract is a 1 year commitment).
What is the incremental analysis if the Lees choose Option 1 over Option 2?