Question

Reliable Rental Resources, Inc. is buying a new computer for its receptionist. The company can rent a basic computer for $2,500 per year. The company can rent a better computer for $3,100 per year, but the better computer uses some software that the basic computer cannot use, and that software costs $750. The receptionist’s salary of $2,200 month will not be affected by the computer that the company decides to rent. If the company rents the better computer, the receptionist will need training on the software that the computer uses, and that training costs $300 per year. The better computer has a greater capacity and speed than the basic computer and is expected to save the company $1,600 per year in part-time wage expenses. The other upkeep and operating costs will not be affected by the computer that the company decides to rent.

a. Identify the relevant costs.
b. Which computer should the company rent?

Answer 1