You are planning to buy a new car. Based on your market research you have narrowed the decision to a choice between a Honda Civic and a Toyota Corolla. Since you are indifferent between the two vehicles you decide to base you decision on relevant cost only. You will be trading in your current vehicle which you purchased used a year ago. You expect to keep the new vehicle for five years. You have gathered the following data for use in your decision:

Required:
A. Which if any of the listed costs above are not relevant to your decision?
B. What are the total relevant costs and allowances of purchasing the Civic?
C. What are the total relevant costs and allowances of purchasing the Corolla?
D. What is the differential cost involved in your decision?

Question

You are planning to buy a new car. Based on your market research you have narrowed the decision to a choice between a Honda Civic and a Toyota Corolla. Since you are indifferent between the two vehicles you decide to base you decision on relevant cost only. You will be trading in your current vehicle which you purchased used a year ago. You expect to keep the new vehicle for five years. You have gathered the following data for use in your decision:
  
Required:
A. Which if any of the listed costs above are not relevant to your decision?
B. What are the total relevant costs and allowances of purchasing the Civic?
C. What are the total relevant costs and allowances of purchasing the Corolla?
D. What is the differential cost involved in your decision?

Quizplus · Accepted Answer

The Answer of You are planning to buy a new car. Based on your market research you have narrowed the decision to a choice between a Honda Civic and a Toyota Corolla. Since you are indifferent between the two vehicles you decide to base you decision on relevant cost only. You will be trading in your current vehicle which you purchased used a year ago. You expect to keep the new vehicle for five years. You have gathered the following data for use in your decision:
  
Required:
A. Which if any of the listed costs above are not relevant to your decision?
B. What are the total relevant costs and allowances of purchasing the Civic?
C. What are the total relevant costs and allowances of purchasing the Corolla?
D. What is the differential cost involved in your decision?

You Are Planning to Buy a New Car