MC Qu. 22 A boat, costing $108,000 and uninsured, was A boat, costing $108,000 a

Question

MC Qu. 22 A boat, costing $108,000 and uninsured, was A boat, costing $108,000 and uninsured, was wrecked the very first day it was usea new as far as operating characteristics and looks are concerned. A relevant cost an. O A cost equivalence between the two decision options. An $11,000 net advantage associated with the decision to fix the old boat. A $1000 cost advantage associated with the decision to fix the old boat. O A$21000 cost advantage associated with the decision to fix the old boat O A $2.000 cost advantage associated with the decision to purchase a new boa References MC Qu. 22 A boat, costing $108.000 and uninsured, was Multiple Choice

Explanation / Answer

The boat will yield $11000 of cash if it is disposed off. A new boat costs $110000. Thus, the net cost of a new boat is $99000. It can be rebuilt for $98000. Thus, the cost advantage is ($99000-$98000)=$1000.

Thus, correct option is the third one.

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