Kristen Lu purchased a used automobile for $29,000 at the beginning of last year and incurred...
Kristen Lu purchased a used automobile for $29,000 at the beginning of last year and incurred the following operating costs: Depreciation ($29,000 ÷ 5 years) $ 5,800 Insurance $ 3,000 Garage rent $ 1,600 Automobile tax and license $ 800 Variable operating cost $ 0.13 per mile The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usage, the car will have zero resale value in five years, so the annual straight-line depreciation is $5,800. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 28,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.)
Homework Answers
Answer
| The average cost per mile | $ 0.53 |
Calculations:
| Calculations of average cost per mile | |
| Fixed costs: | |
| Depreciation | $ 5,800.00 |
| Insurance | $ 3,000.00 |
| Garage Rent | $ 1,600.00 |
| Automobile tax and license | $ 800.00 |
| Total fixed costs | $ 11,200.00 |
| Fixed cost per mile ($11200/ 28000) | $ 0.40 |
| Variable operating cost per mile | $ 0.13 |
| Average cost per mile | $ 0.53 |
In case of any doubt, please comment.
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