A contractor is comparing rental rates for excavators. Option A costs $2,800/month with a $500 delivery fee. Option B costs $3,100/month with free delivery. For a 4-month rental, what is the total cost difference?
Correct Answer
C) Option B costs $700 more
Option A total: ($2,800 × 4) + $500 = $11,700. Option B total: $3,100 × 4 = $12,400. Difference: $12,400 - $11,700 = $700, making Option B cost $700 more than Option A.
Why This Is the Correct Answer
Option B is correct because when calculating the total costs over 4 months, Option A totals $11,700 (including the one-time delivery fee) while Option B totals $12,400. The difference of $700 shows that Option B costs more than Option A. This demonstrates the importance of including all fees when comparing rental options.
Why the Other Options Are Wrong
Option A: Option A costs $1,200 more
Option D is incorrect because the cost difference is $700, not $1,200, and it incorrectly states that Option B costs $1,200 more when Option B actually costs $700 more.
Option B: Option A costs $700 more
Option C is incorrect because while it correctly identifies that Option A costs more, the amount is wrong - the actual difference is $700, not $1,200.
Memory Technique
Remember 'TOTAL before COMPARE' - always calculate the complete total cost including all fees before making comparisons between options.
Reference Hint
Business and Finance chapter - Equipment rental cost analysis and project cost estimation sections
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