Community College of Puxton Park (CCPP) is trying to determine if it is more cost effective to reimburse employees for mileage in traveling to educational conferences or should the college purchase a vehicle to be used for employee travel to conferences. The following information has been provided with regards to the decision: Given the quantitative information for the two options, which option would you select as most beneficial to CCPP and why?
A)The option to continue mileage reimbursement should be selected since it will only cost $16,240 whereas, the option for the new vehicle will cost $31,500.
B) The option to continue mileage reimbursement should be selected since it will only cost $16,240 whereas, the option for the new vehicle will cost $28,000.
C) The option to purchase the new vehicle should be selected with a total annual cost of $9,100 whereas, the option to continue mileage reimbursement will cost $16,240.
D) The option to purchase the new vehicle should be selected with a total annual cost of $5,600 whereas, the option to continue mileage reimbursement will cost $16,240.

Question

Community College of Puxton Park (CCPP) is trying to determine if it is more cost effective to reimburse employees for mileage in traveling to educational conferences or should the college purchase a vehicle to be used for employee travel to conferences. The following information has been provided with regards to the decision:  Given the quantitative information for the two options, which option would you select as most beneficial to CCPP and why?
A)The option to continue mileage reimbursement should be selected since it will only cost $16,240 whereas, the option for the new vehicle will cost $31,500. 
B) The option to continue mileage reimbursement should be selected since it will only cost $16,240 whereas, the option for the new vehicle will cost $28,000. 
C) The option to purchase the new vehicle should be selected with a total annual cost of $9,100 whereas, the option to continue mileage reimbursement will cost $16,240. 
D) The option to purchase the new vehicle should be selected with a total annual cost of $5,600 whereas, the option to continue mileage reimbursement will cost $16,240.

Quizplus · Accepted Answer

Annual cost associated with the mileage reimbursement option is 29,000 miles x $56/mile = $16,240 and the total annual cost related to the purchase of a new vehicle = $28,000 / 5 years = $5,600 annual depreciation + $1,000 annual maintenance + $2,500 annual vehicle insurance & registration = $9,100. Since the annual cost of the vehicle purchase/ownership is less at $9,100 vs. $16,240 in mileage reimbursement, the option to purchase the vehicle should be selected.

Community College of Puxton Park (CCPP) Is Trying to Determine