Brewton Freight Company owns a truck that cost $40,000. Currently, the truck’s b

Question

Brewton Freight Company owns a truck that cost $40,000. Currently, the truck’s book value is $24,000, and its expected remaining useful life is five years. Brewton has the opportunity to purchase for $24,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,200 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $13,000.

1. Required:

Calculate Total Relevand Costs for:

a) Keep Old

b) Replace with a New One

Should Brewton replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out?

Should Brewton replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out?

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Keep Old Truck New Truck Differential Purchase cost of new truck                24,000.00         (24,000.00) Less Sale Value of old truck              (13,000.00)            13,000.00 Incremental Relevant fuel cost Old truck -= 5200*5                 26,000.00            26,000.00 Total Relevant Costs                 26,000.00                11,000.00            15,000.00 Brewton should replace the old truck with the new fuel-efficient model,

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