Question

The paragraph below comes from the rental agreement Susan signed when she opened her account at Super Video.

"All rentals are due back by midnight of the due date as printed on the transaction receipt. Any rental not received by midnight on the day it is due is subject to a late charge of $1.50 for each day it is late. Any rental not returned by the fifth day after the due date will be transferred to a sale. The Customer will then be required to pay the purchase price of the item in addition to five (5) days of late fees. The Customer will not be required to return the product once the total balance is paid."

As of today, Susan's movie is currently five days late. She knows that if she doesn't get the movie back tonight, she will be charged $9.99, the purchase price of the movie, plus five days' worth of late fees. A round trip cab ride to the video store will cost about $10.

Which of the following statements is true?
a.
Taking a cab to return the movie is the cheapest action. Susan should call a cab.
b.
It would cost about the same to keep or return the movie. Susan should keep it.
c.
Keeping the movie and paying the purchase price and late fees is the cheapest option.
d.
If Susan returns the movie, she should not have to pay late fees. She should return it.


ANSWER IS D

Answer 1

c. Keeping the movie and paying the purchase price and late fees is the cheaper option.

Explanation:

1. If Susan takes a cab and pays late fees

Cost of cab = $10.00

Late fees = 5 × 1.50 = 7.50

TOTAL = $17.50

2. If Susan keeps the movie

Purchase price of movie = $9.99

Late fees = 5 × 1.50 = 7.50

TOTAL = $17.49

Keeping the movie and paying the purchase price and late fees is the cheapest option.

a. is wrong. Taking a cab is the more expensive option.

b. is wrong. Susan contracted to return the movie, so she should try to do so.

c. is correct. This is a statement of fact, not a judgement call.

d. is wrong. Susan contracted to pay the late fees if she did not return the video (but she should still return it).