Question

In: Accounting

Annual depreciation $ 3,000   Annual mileage 14,640     Current year's loan interest $ 710   Miles per gallon...

Annual depreciation $ 3,000   Annual mileage 14,640  
  Current year's loan interest $ 710   Miles per gallon 24
  Insurance $ 860   License and registration fees $ 125
  Average gasoline price $ 3.50 per gallon   Oil changes/repairs $ 730
  Parking/tolls $ 660

   

a. Calculate total annual operating cost of the motor vehicle.

   

  Total variable cost $   
  Total fixed cost $   
  Total annual operating cost $   

  

b. Calculate operating cost per mile. (Enter your answer in cents rounded to 1 decimal place.)

  

  Operating cost per mile cents

Solutions

Expert Solution

Annual depreciation $ 3,000.00   Annual mileage 14,640  
  Current year's loan interest $    710.00   Miles per gallon 24
  Insurance $    860.00   License and registration fees $ 125.00
  Average gasoline price $        3.50 per gallon   Oil changes/repairs $ 730.00
  Parking/tolls $    660.00
Variable cost calculation:
Annual Mileage 14640
÷ Miles per gallon 24
Gasoline required(in Gallons) 610
x Average gasoline price 3.5
Total price of gasoline $      2,135
Fixed Cost
Annual depreciation $ 3,000.00
  Current year's loan interest $    710.00
  Insurance $    860.00
  Parking/tolls $    660.00
  License and registration fees $    125.00
  Oil changes/repairs $    730.00
Total Fixed Cost $ 6,085.00
a   Total variable cost $      2,135
  Total fixed cost $      6,085
  Total annual operating cost $      8,220
b Total annual operating cost $          8,220
÷ Annual mileage 14640
Operating cost per mile $            0.56
or $0.6 rounded to 1 decimal

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