Alton Van Lines is considering the acquisition of two new trucks. Because of improved mileage, these vehicles are expected to have a lower operating cost per mile than the trucks the company plans to replace. Management is studying whether the firm would be better-off keeping the older vehicles or going ahead with the replacement, and has identified the following decision factors to evaluate: 1. Cost and book value of the old trucks2. Moving revenues, which are not expected to change with the acquisition3. Operating costs of the new and old vehicles4. New truck purchase price and related depreciation charges5. Proceeds from sale of the old vehicles6. The 8% return on alternative investments that Alton will forego by tying up cash in the new trucks7. Drivers' wages and fringe
benefitsRequired: Classify the seven decision factors listed into the following categories (note: A factor may be included in more than one category, or the factor may not necessarily be included in any of the categories):A. Relevant information.B. Opportunity costs.C. Sunk costs.D. Factors to be considered in the decision.
What will be an ideal response?
A. 3, 4, 5, 6
B. 6
C. 1
D. 3, 4, 5, 6
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