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ACCOUNTING: IDENTIFICATION OF RELEVANT COSTS CHECK ANSWER?

James and Janet Jones are trying to decide whether to go to the symphony or to the baseball game. They already have two nonrefundable tickets to "Pops Night at the Symphony" that cost $40 each. This is the only concert of the season they considered attending because it is the only one with the type of music they enjoy. The baseball game is the last one of the season, and it will decide the league championship. They can purchase tickets for $20 each. The Jones will drive 50 miles round-trip to either event. Variable costs for operating their auto are $.18 per mile, and fixed costs average $.13 per mile for the 15,000 miles they drive annually. Parking at the symphony is free, but it costs $6 at the ball game.

To attend either event, James and Janet will hire a baby-sitter at $7 per hour. They expect to be gone 5 hours to attend the baseball game, but only 4 hours to attend the symphony.

Compare the cost of attending the baseball game with the cost of attending the symphony. Focus on relevant costs. Compute the difference in cost, and indicate which alternative is more costly to the Jones.

I want to check my computing:

Symphony 80 two tickets

50miles x 0,18 = 9

50 miles x 0,13 = 6,5

7 x 4 hour = 28

total $129.5

Baseball:

$40 +9+6,5 + 35 = $90,5

Is this correct?

thanks

1 Answer

Relevance
  • Anonymous
    1 decade ago
    Favorite Answer

    I think it is a trick question in some respects. The $80 for the symphony is what is commonly called a "sunk cost." That money is already spent and is irrelevant to this particular question (ignoring, of course, the possibility of re-selling the tickets). So relative to where they are right now, the baseball game would actually be more expensive, because you are out the $80 on the symphony tickets either way.

    Source(s): Good luck and God Bless. (CPA)
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