Question

Derek Dingler conducts corporate training seminars on managerial accounting techniques all around the country. An upcoming training seminar is to be held in Philadelphia. Just prior to that engagement, Derek will be in New York City. He plans to stay in Philadelphia the night of the seminar, as the next morning he plans to meet with clients about future training seminar possibilities. One travel option is to fly from New York to Philadelphia on the first flight on Friday morning, which will get him to Philadelphia two hours before the start of his seminar. The cost of that flight is $287. Uber fees for his time in Philadelphia will cost $68. His meal per diem is $40 for each full day and $25 for each half day. The hotel cost is $225 per night. His second option is to rent a car and drive the two hours to Philadelphia from New York City the afternoon before the seminar. The cost of the rental car including gas is $57 per day and the car will be needed for two full days. At the end of the meetings he will return to New York City. What are the relevant costs, relevant revenues, sunk costs, and opportunity costs that Derek Dingler has to consider in making the decision whether to fly or drive from New York City to Philadelphia?

A.Car rental, Uber, one hotel night, and a half-day per-diem only

B.Airfare, Uber, and one hotel night only

C.Airfare, car rental, Uber, one hotel night, and a half-day per-diem only

D.Airfare and car rental only

Answer 1

The relevant cost for making the decision whether to fly or drive from New York City to Philadelphia are :-

1) Airfare,

2) Uber, and

3) Car rental cost

as if he rents a car he won't incur airfare and uber cost.

Sunk Costs are

1) Hotel night stay cost

2) Meal cost

As he is going to incur hotel and meal expense in both the cases no matter how he travels.