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Walking Gems Incorporated cuts and sets gemstones and designs custom jewelry. Walking Gems is considering expanding its business to include a goldsmithing shop that will expand the company's design capabilities.

Goldsmith, salary and benefits: \$67,500
Existing assistant, salary and benefits: \$35,000
Smithing supplies: \$5,000
Annual rent on existing space: \$120,000
Depreciation on current equipment: \$65,000
Advertising for new services: \$20,000
Advertising for existing services: \$25,000
Expected increase in revenues from goldsmith's designs: \$120,000

Based on the facts provided, should Walking Gems Incorporated undertake this expansion?

Walking Gems
Select Option shouldshould not
undertake this expansion as their operating income will
Select Option increasedecrease
Select Option \$27,500(\$27,500)\$92,500(\$92,500)
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