Identify relevant information (Learning Objective 6)

You receive two job offers in the same big city. The first job is close to your parents house, and they have offered to let you live at home for a year so you won’t have to incur expenses for housing, food, or cable TV. This job pays $45,000 per year. The second job is far away from your parents’ house, so you’ll have to rent an apartment with parking ($10,000 per year), buy your own food ($3,000 per year), and pay for your own cable TV ($700 per year). This job pays $50,000 per year. You still plan to do laundry at your parents’ house once a week if you live in the city, and you plan to go into the city once a week to visit with friends if you live at home. Thus, the cost of operating your car will be about the same either way. In addition, your parents tefuse to pay for your cell phone service ($720 per year), and you can’t function without it.

Requirements

a. Based on this information alone, what is the net difference between the two alternatives (salary, net of relevant costs)?

b. What information is irrelevant? Why?

c. What qualitative information is relevant to your decision?

d. Assume that you really want to take Job #2, but you also want to live at home to cut costs. What new quantitative and qualitative information will you need to incorporate into your decision?