Relevant Cost - Keep or Replace

RELEVANT COST – KEEP OR REPLACE

Faridzwan drives and owns his own taxi cab (Grab). He is considering replacing his old cab with a new more efficient hybrid model. Below is some information related to the decision.

	Old Cab RM	New Hybrid Cab RM
Original cost new	25,000	30,000
Accumulated depreciation	5,000
Salvage value	10,000
Annual operating cost	20,000	15,000

He expects both his old cab and the new hybrid cab would be useful for 6 years from now.

Required:

Determine the advantage or disadvantage of purchasing the new hybrid cab