A Consumer Is Trying to Decide Whether to Purchase Car

question 48

Multiple Choice

A consumer is trying to decide whether to purchase car A or car B. Car A costs $10,000 and has an mpg rating of 30, and insurance is $500 per year. Car B costs $11,600 and has an mpg rating of 50, and insurance is $550 per year. Assume that the consumer drives 15,000 miles per year and that the price of gas remains constant at $1.25 per gallon. Based only on these facts, determine how long it will take for the total cost of car B to become less than that of car A.

• A)27 years
• B)9 years
• C)8 years
• D)17 years
• E)37 years

---

Definitions:

Physical Inventory

The process of counting and verifying the actual stock in a business at a specific point in time.

Perpetual Inventory System

A digital system for inventory management that immediately documents any inventory sale or purchase using electronic point-of-sale systems along with enterprise asset management software.

MasterCard and VISA

Major global payment networks and companies facilitating electronic funds transfers through branded credit, debit, and prepaid cards.

Service Fee

A charge for the provision of a service, often separate from the cost of goods sold.