After an accident Jack’s 5-year-old Saturn Vue requires repairs estimated at $8,

Question

After an accident Jack’s 5-year-old Saturn Vue requires repairs estimated at $8,500 to make it roadworthy again. His friend, Jill, suggested that he should buy a 5-year-old used Toyota Corolla instead for $8,500 cash. Julie estimated the following costs for the two cars:

Saturn Vue    Toyota Corolla
            Acquisition cost                      $30,000           $9,000
            Repairs                                    $ 8,500           —
            Annual operating costs           $ 6,379           $5,441
                 (Gas, maintenance, insurance, depreciation)
            Depreciation                            $1,172             $731

The cost NOT relevant for this decision is the:

Select one:

a. acquisition cost of the Saturn Vue

b. acquisition cost of the Toyota Corolla

c. repairs to the Saturn Vue

d. annual operating costs of the Toyota Corolla

Explanation / Answer

Solution : The cost NOT relevant for this decision is the

a. acquisition cost of the Saturn Vue

Explanation : since Saturn Vue is 5 years old car and it has been purchased 5 years ago. Hence, it's no more relevant for the decision.

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