Reference no: EM13829638

Metropolis Health System has to do something about their ambulance situation. They have to (1) buy a new ambulance, (2) lease a new one, or (3) renovate an existing ambulance that MHS already owns. Rob Lackey, the Assistant Controller, has been asked to gather pertinent information in order to make a decision. So far Rob has found these facts:

1. It will cost at least $250,000 to purchase a new ambulance, although the cost varies widely depending upon the quantity and sophistication of the emergency equipment contained on the vehicle.

2. In order to renovate the existing vehicle, it will cost at least $100,000 to purchase and install a new “box.” (In other words, a new emergency-equipped body is installed on the existing chassis.) Rob has found this existing ambulance has an odometer reading of 80,000 miles. The vehicle will also need a new fuel pump and new tires, but he believes these items would be recorded as repair and maintenance operating expenses and thus would not be included in his calculations.

3. Lease terms for ambulances also vary widely, but so far Rob believes a cost of $60,000 per year is a ballpark figure.

Required

How much more information should Rob have before he begins to make any calculations? Make a list. Which alternative do you believe would be best? Give your reasons.