Kristen Lu purchased a used automobile for $18,000 at the beginning of last year

Question

Kristen Lu purchased a used automobile for $18,000 at the beginning of last year and incurred the following operating costs: Depreciation ($18,000 5 years) Insurance Garage rent Automobile tax and license Variable operating cost $3,600 $1,900 $1,000 $500 S0.13 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 $3,600. The car is kept in a garage for a monthly fee Required 1. Kristen drove the car 14,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Fixed cost per mile Variable operating cost per mile Average cost per mile 2. Kristen is unsure about whether she should use her own car or rent a car to go on an extended cross- country trip for two weeks during spring break. What costs above are relevant in this decision? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.) E] Variable operating costs Depreciation Automobile tax License costs 2Insurance costs

Explanation / Answer

1 Fixed cost per mile 0.5 =(3600+1900+1000+500)/14000 Variable operating cost per mile 0.13 Average cost per mile 0.63 2 Only variable operating costs is relevant

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