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Variable cost per journey

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The CCC Corporation has won a tender to drill an oil field in the Oman Sea. In order to transport the workers to the site, CCC has the following two options with related cost:

Option1: To buy a ship for O.R 20,000,000. Annual fixed operating costs will be O.R 500,000 the variable cost per journey is O.R 1,000. At the end of the four-year project, the ship can be disposed of for O.R 12,000,000.

Option2: To buy a helicopter for O.R 12,000,000. The average operating costs will be O.R 500 per trip. Maintenance costs are expected to be O.R 200,000 annually. At the end of the four-year project, the helicopter can be sold for O.R 4,000,000.

Reference no: EM131835773

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