Seeking to find gainful part-time employment, Olivia is choosing between two job offers. The first, a sales position at a department store, pays a flat salary of $8 per hour. As Olivia plans to work 80 hours per month, she expects to earn $640 per month. The second job, at a stereo store, pays a monthly salary of $400 for a ½ time position (20 hours per week or 80 hours per month) plus commissions. The store manager informs Olivia that, on average, ½ time salespeople earn commissions of $300 per month.
Olivia estimates that, regardless of the position taken, she will incur about $125 in travel costs per month. Olivia currently shares an apartment with three friends. Her share of the rent and utilities is $250 per month.
Required:
a. Classify the following costs and benefits as to their relevance for Olivia's decision: (1) Job salaries; (2) commissions; (3) transportation costs; (4) rent and utilities.
b. Evaluate Olivia's decision using relevant costs and benefits.