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Your car-related costs are the following: Insurance Interest Fuel Oil Licence and registration fees R465 per year Maintenance

Question:

If you were to drive 10 000 km every year, what would be your variable cost per km?

Given:

Variable cost consist of fuel, oil, maintenance and tyres.

Answer is: R1.6614/km

I dont know how to get to the answer. Thanks

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Answer #1

Insurance, interest, and licence and registration fees are fixed costs.

Variable cost per km = fuel + oil + maintenance + tyres

Fuel costs/ km = 14.5/11 = Rs. 1.3

Oil costs/km = 40/600 = 0.06

Maintenance costs per km = 2400/10000 = 0.24

Tyres cost/km = 700×4 / 40000 = 0.07

Total variable costs = 1.3 + 0.06 + 0.24 + 0.07 = 0.67 (approximately)

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