Hartley's Meat Pies is considering replacing its existing delivery van with a new one.The new van can offer considerable savings in operating costs.Information about the existing van and the new van follow:

Relevant costs for this decision include ________.
A)the original cost of the existing van
B)accumulated depreciation
C)the annual operating cost
D)the book value of the existing van

Question

Hartley's Meat Pies is considering replacing its existing delivery van with a new one.The new van can offer considerable savings in operating costs.Information about the existing van and the new van follow:

Relevant costs for this decision include ________.

Relevant costs for this decision include ________.
A)the original cost of the existing van 
B)accumulated depreciation 
C)the annual operating cost 
D)the book value of the existing van

Quizplus · Accepted Answer

The relevant costs for this decision include the annual operating cost, as this is where the new van can offer considerable savings. The original cost of the existing van and accumulated depreciation are sunk costs and are not relevant for this decision. The book value of the existing van is also not relevant as it is not a cash flow that will be affected by the decision to replace the van.

Hartley's Meat Pies Is Considering Replacing Its Existing Delivery Van