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Identify the characteristics of relevant costs

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Question: Melissa McKenzie purchased a second-hand car off Trade Me at the beginning of last year for $10 000. During the year she has owned the car, she has incurred the following expenses.

Depreciation 2 000

Insurance 960

Garage rent 480

Warrant of Fitness fees 60

Variable operating costs/km 0.08

Variable operating costs consist of fuel, oil, tyres, maintenance and repairs. Melissa expects the car to have zero resale value after using it for another 5 years. She has decided to depreciate her car using the straight-line depreciation method over the full 5 years. The car is kept in a garage for a $40 a month fee.

Required: Identify three characteristics of relevant costs and outline why each characteristic is important.

Reference no: EM132717662

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