Kristen Lu purchased a used automobile for $28,150 at the beginning of last year
ID: 2586851 • Letter: K
Question
Kristen Lu purchased a used automobile for $28,150 at the beginning of last year and incurred the following operating costs:
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 $5,630. The car is kept in a garage for a monthly fee.
Required:
1. Kristen drove the car 27,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.)
Depreciation ($28,150 ÷ 5 years) $ 5,630 Insurance $ 2,900 Garage rent $ 1,500 Automobile tax and license $ 770 Variable operating cost $ 0.10 per mileExplanation / Answer
Depreciation $ 5,630 Insurance $ 2,900 Garage rent $ 1,500 Automobile tax and licence $ 770 Total fixed cost $ 10,800 Miles driven 27,000 Fixed cost per unit ($10,800/27,000) $ 0.40 Add: variable operating cost per unit $ 0.10 Average cost per mile $ 0.50
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