A company currently sells through multiple outlets. There are two selling options:

Option A: Sell additional products online directly to customers. These products are currently sold to outlet stores. The new online customers would pay by credit card. No additional investment is required.

- Cost sales are expected to increase by $250,000 per year.

- Costs are:

Cost of goods sold: $135,000

Credit card fees: 4.75% of sales

Additional record-keeping and shipping 6% of sales

- Online sales will reduce sales to stores by $35,000. These sales have a 25% gross margin

Option B: Expand to more outlet stores

- Additional credit sales would be $500,000

- Cost are:

Cost of goods sold $375,000

Additional record-keeping and shipping 4% of sales

Uncollectible accounts will be 6.2% of sales

Required:

1) Compute the additional annual net income or loss expected under Option A and B. Show your calculations

2) Should the company pursue either plan? Consider relevant financial and nonfinancial factors in your answer.