Question

14 1 points You are going to pay cash to buy a motorcycle. You intend to sell the motorcycle after two years. The costs of buying and operating the motorcycle for the two years are: • A purchase price of $10,000; a resale price (after two years) of $6,000; annual insurance of $1,000; registration (good for two years) of $100 You expect to ride the motorcycle for 15,000 miles per year and the motorcycle gets 60 miles per gallon. The price of gasoline is expected to be $1.8 per gallon. Over the two year period you will also need to: • obtain 6 oil changes. The cost of an oil change is $25. • replace both tires 2 time(s). The total cost of a new set of (2) tires is $350. for both tires. • obtain general service 6 times at $200 for each service. Book Print References a. Calculate the total fixed cost, total variable cost, and cost per mile for the two-year period. Fill in the blanks below. Instructions: Round your answers for total fixed cost and total variable cost to the nearest dollar. Round your answers for cost per mile to the nearest cent. Total Fixed Cost Total Variable Cost Cost per Mile b. Suppose you want to lower the cost per mile. You should focus on: Ofixed costs, because they must be paid. variable costs, because they can be avoided. variable costs, because they they represent a majority of the total costs. fixed costs, because they represent a majority of the total costs.

Answer 1

Fixed cost include purchase price + 2*annual insurance+ registration- resale price

Fixed cost= 10000+2*1000+100-6000 = $6100

Variable cost= Cost of Gasoline =

((15000*2)/60)*1.8)= $900

+ Oil changes(=6*25=$1500)

+ Total cost of tire(=2*$350=$700)

+ General service(=6*200=$1200)

= $4300

Total cost=$6100+$4300=$10400

Cost per mile= Total cost/total miles=10400/30000=$0.35

As Total mile= 2*15000=30000 miles

b. C fixed cost , because they represent a majority of the Total cost

Fixed cost are more than variable cost $6100>$4300, so reducing fixed cost will reduce cost per mile.