A consumer purchases a washing machine for $£800$ that comes with a 2‑year guarantee covering parts only. After $18$ months the machine develops a fault and a repair would cost $£120$. The consumer is offered a partial refund based on the machine's depreciated value (straight‑line over $5$ years) and the proportion of the guarantee that remains.

Calculate (a) the amount of refund the consumer would receive if the machine is returned now, and (b) whether returning the machine results in a net gain or loss compared with keeping it and paying for the repair.

Question

A consumer purchases a washing machine for $£800$ that comes with a 2‑year guarantee covering parts only. After $18$ months the machine develops a fault and a repair would cost $£120$. The consumer is offered a partial refund based on the machine's depreciated value (straight‑line over $5$ years) and the proportion of the guarantee that remains.

Calculate (a) the amount of refund the consumer would receive if the machine is returned now, and (b) whether returning the machine results in a net gain or loss compared with keeping it and paying for the repair.

Accepted Answer

Refund = £140; returning gives a net gain of £20 compared with keeping the machine.

Gce Model Questions Vol1 2022 Commerce Question 47

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