4 John travels from city to city for business. Every other year he buys a used c

Question

4 John travels from city to city for business. Every other year he buys a used car for about other year for a car. John keeps accurate records of his expenses, which total 32.3 é per mile. John's employer has two plans to reimburse car expenses: $15,000. The dealer allows about $8000 as a trade-in allowance, so John spends $7000 every a) Actual expenses: John will receive all his operating expenses, and $3500 each year for the car's decline in value. b) Standard mileage rate: John will receive 56.5e per mile but no operating expenses and no depreciation allowance. If John travels 20,000 miles per year, which method gives him the larger reimbursement? At what annual mileage do the two methods give the same reimbursement? A New York renewable energy company pays $0.18 per kilowatt-hour (kWh) for the first 10,000 units of electricity each month and $0.15/k Wh for all remaining units. If a firm uses 25,000 5 kWh/month, what is its average and marginal cost?

Explanation / Answer

Plan A - Actualy expenses

The total reimbursement received = 3500 + (20000 * 32.3) = 3500 + 6460 = $9960

Plan B - Standard Mileage Rate

The total reimbursement received = (20000 * 56.5) = $11,300

So we see that Plan B - Standard Mileage Rate provides higher reimbursement.

The mileage rates have difference of = 56.5 - 32.3 = 24.2 cents per mile.

The difference in the fixed component of the reimbursement is $3500.

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