The Owner of a Local Restaurant Is Deciding Whether to Lease

question 50

Essay

The owner of a local restaurant is deciding whether to lease a company van. If the van is leased, the company would avoid paying its vendors to deliver the supplies and food purchases. The owner has negotiated a potential lease contract that would require a down payment plus a flat monthly rental payment. At the end of each year, an additional "contingency" rental payment would be required if the total number of kilometres driven exceeds 8,000. The owner has estimated that the van will be driven 600 kilometres per month for picking up supplies and food purchases, so she does not expect to incur a contingency annual payment. Based on these kilometres, the owner has calculated the expected amount of cost for fuel, repairs, and maintenance. She has received a quote from her insurance company for the next six months' insurance. She plans to hire a part-time employee at $10 per hour to drive the van. The employee will work a flexible schedule based on the deliveries required. Items 1 through 7 are relevant costs for this decision. Indicate whether the dollar amount of each relevant cost is most likely
C certain or
U uncertain.
Each item has only one correct response.
1 Lease down payment
2 Monthly lease rental payments
3 Contingency annual payment
4 Fuel, repairs, and maintenance
5 Van insurance for the next six months
6 Part-time employee wages
7 Reduction in vendor delivery charges

---

Definitions:

Servitude

A condition in which an individual lacks liberty and is forced to work for another person, often without pay.

Magnetic Domains

A section within a magnetic material where atoms are aligned to produce a north or south polarity.

Molecular Structure

The arrangement of atoms within a molecule that defines its chemical properties and physical behavior.

Magnetic Metals

Metals that are capable of being attracted by a magnet or can be magnetized, such as iron, nickel, and cobalt.