If repair costs exceed what percentage of the acquisition cost, should the asset not be repaired?

• A. 50%
• B. 60%
• C. 75%
• D. 90%

Answer: (C)

The recommended threshold for determining whether the repair costs of an asset are economically feasible is typically set around 75% of the acquisition cost. If the estimated repair costs surpass this percentage, it suggests that it would be more economically sensible to consider alternatives, such as replacing the asset rather than investing a large sum into repairing it.

Investing in repairs that cost more than 75% of the asset's original value may not yield adequate returns, as it may not extend the asset's useful life or improve its operational efficiency sufficiently. This principle is often applied in financial analysis to guide decisions related to asset management.

The other percentages offered do not align with this common threshold, as they represent either lower limits that could still justify repairs or exceed acceptable financial risk levels when evaluating the cost-effectiveness of maintaining older assets.