12. 32.

Replacement decisions [LO 10.2] Your small remodelling business has two work vehicles. One is a small passenger car used for job site visits and for other general business purposes. The other is a heavy truck used to haul equipment. The car gets 10 litres per 100 kilometres.

The truck gets 23 litres per 100 kilometres. You want to improve mileage to save money and you have enough money to upgrade one vehicle. The upgrade cost will be the same for both vehicles. An upgraded car will get 8 litres per 100 kilometres; an upgraded truck will get 19 litres per 100 kilometres. The cost of fuel is $1.65 per litre.

Assuming an upgrade is a good idea in the first place, which one should you upgrade? Both vehicles are driven 19 500 kilometres per year.