Relevant and sunk costs Don Baxter’s 6 year old Impala requires repairs estimated at $5,400 to make it roadworthy again. His friend Aaron Bloom suggested that he buy a 6 year old Ford Escort instead for $5,400 cash. Aaron estimated the following costs for the two cars:
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Required
(a) What costs should the decision maker consider as sunk costs?
(b) List all relevant costs and when they are incurred.
(c) What should the plant manager do? Why? Required
(a) What costs are relevant and what costs are not relevant to this decision? Why?
(b) What should Don do? Explain.
(c) What quantitative and qualitative factors are relevant to his decision? Why?
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