Jack received $560 from his grandmother. He decided to shop for a gift for himself and spent $7 for his bus fares. Jack decided to purchase a new bike for $560. For the same amount, he could have purchased a model GH-200 aeroplane that he adored and that would have provided $120 more benefit than the new bike. Jack was also considering a trip to Melbourne to visit his aunt, although he was not too keen about it. He was also interested in pursuing a course leading to a private pilot's licence, although he is a bit scared of heights. One month later, the price of the bike Jack purchased from Hut Ltd had gone down by $100. The bike had cost Hut Ltd $260 of labour and $170 of plant and equipment. The differential benefit of the aeroplane is:
A) $7.
B) $120.
C) $430.
D) $560.

Question

Quizplus · Accepted Answer

The differential benefit of the aeroplane is $120 more than the benefit from the bike. So, if Jack had purchased the aeroplane instead of the bike, he would have received an additional benefit of $120. Choosing the trip to Melbourne or the private pilot's license would not have provided any financial benefit. The price of the bike going down by $100 a month later does not affect the differential benefit of the aeroplane.

Jack Received $560 from His Grandmother