Assignment 6 ignment6.pdf Question 1 (9 marks) Roster Roofing Ltd. is planning o

Question

Assignment 6 ignment6.pdf Question 1 (9 marks) Roster Roofing Ltd. is planning on purchasing two new trucks for its operation. The operating cost of these trucks is expected to be lower per mile than the trucks it is trading in. The owner is trying to determine if the company would be better off keeping the older vehicles or purchasing the new trucks. He has identified the following decision factors to consider a. Original cost and book value of the old trucks b. Roofing revenues, which are not expected to change with the purchase of the new vehicles c. Operating costs of the new and the old vehicles d. Cost of the new trucks and the related depreciation costs e. Proceeds from the sale of the old vehicles f. The 10% return on alternative investments that Roster will forego by tying up the company's cash in new vehicles Drivers' wages and fringe benefits g. Required: Classify the seven decision factors into the following categories (factors may be used more than once): a. Relevant costs b. Opportunity costs c. Sunk costs d. Factors to be considered in the decision 1. TRU Open Learning

Explanation / Answer

Orginal Cost and Book value of the old truck Sunk Costs Roofing Revenue ,Which are not expected to change with the purchase of the new Vehicle Factors to be considered in the decision Operating Cost of new and the old vehicles Relavent Cost Cost of the new trucks and related depreciation cost Relavent Cost Proceeds from sale of old vehicles Opputunity Cost the 10% return on laterernative investment that Roster willforgoe by trying up the companyise cash in new veichles Opputunity Cost Drivers wages and fring benfits Relavent Cost

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