Question 11-22 Opportunity costs.

After thorough saving, a student bought a second-hand car for $1,500. After three months, the gear box broke down and he had to replace it with a new gear box for $400. One morning the car wouldnt start. He called a friend who knew a lot about cars, who concluded that the fuel pump needed replacing at a cost of $250. The car drove surprisingly well during the next several months, but then the cars drive shaft broke, and a mechanic at the garage told the student that this was an expensive repair that had to be done in order to drive again. The replacement of the drive shaft was estimated at $800. The student is wondering if he should he repair the car or not. On the one hand, it is a lot of money. On the other hand he has already invested $2,150 and this will be lost if he doesnt repair the car.

What should the student do? Discuss the opportunity costs.

Required: In your own words discuss the question above in details

Sources: Chapter 11, Cost Accounting, Global Edition, 15th Edition, Pearson. Charles T. Horngren, Srikant M. Datar and Madhav V. Rajan.