Two Types of Batteries Are Being Considered for Use in Electric

question 313

Multiple Choice

Two types of batteries are being considered for use in electric golf carts. Burnout brand has a three year life, while Long-lasting brand has a five year life. You must choose between the two batteries and you expect to replace the brand you ultimately choose continuously. You should:

• A) Take the option with the greater NPV.
• B) Take the option with the lower NPV.
• C) Take the option with the greater EAC.
• D) Take the option with the smaller EAC.
• E) Take the option with the lowest accounting break-even.

---

Definitions:

Price Elasticity

An indicator of the sensitivity of the amount of a good demanded in response to its price changes.

Cost-Plus Pricing

A technique for pricing where a distinct markup is added to the unit cost of a product to establish its selling price.

Linear Programming

A mathematical method used to determine the best possible outcome or solution from a given set of parameters or constraints, usually applied in maximizing or minimizing a linear function.

Material Charges Formula

A calculation used to determine the direct costs associated with the materials used in the production of goods or services.