Chapter 10, Problem 3EB

You are working for a large firm that has asked you to attend a career fair at a university that is 185 miles from your office. You need to be there at 9:00 a.m. on a Monday morning. You can drive your personal car and be reimbursed $0.55 per mile, but you would need to leave home at 5:30 a.m. to get to the event and set up on time. Company policy allows you to spend the night if you must leave town before 6:00 a.m. The hotel across the street from campus charges $85 per night. Instead of driving, you could catch a 7:00 a.m. flight with a round-trip fare of $260. Flying would require you to rent a car for $29 per day, and you would have an airport parking fee of $20 for the day. The company pays a per diem of $40 for incidentals if you spend at least 6 hours out of town. (The per diem would be for one 24-hour period for either flying or driving.) As a manager, you are responsible for recruiting within a budget and want to determine which is more economical.

Use the information provided to answer these questions.

A. What is the total amount of expenses you would include on your expense report if you drive?

B. What is the total amount of expenses you would include on your expense report if you fly?

C. What is the relevant cost of driving?

D. What is the relevant cost of flying?

E. What is the differential cost of flying over driving?

F. What other factors should you consider in your decision between driving and flying?