Chichi purchased a used Honda CRV for RM8,000 at the beginning of last year and incurred the following operating costs: B. Depreciation (RM8,000/5 years) Insurance Parking space fee Road tax and license RM 1,600 RM 1,200 RM 360 40 RM Variable operating cost RM 0.14 per km The variable operating cost consists of petrol, oil, tyres, maintenance and repairs. Chichi estimates that, at her current rate of usage, the car will have zero resale value in five (5) years, so the annual straight-line depreciation is RMI,600. Chichi pay the parking space for a monthly fee.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Chichi purchased a used Honda CRV for RM8,000 at the beginning of last year and
incurred the following operating costs:
B.
Depreciation (RM8,000/5 years)
Insurance
Parking space fee
Road tax and license
RM 1,600
RM 1,200
RM 360
RM
40
Variable operating cost
RM 0.14 per km
The variable operating cost consists of petrol, oil, tyres, maintenance and repairs. Chichi
estimates that, at her current rate of usage, the car will have zero resale value in five (5)
years, so the annual straight-line depreciation is RMI,600. Chichi pay the parking space
for a monthly fee.
Transcribed Image Text:Chichi purchased a used Honda CRV for RM8,000 at the beginning of last year and incurred the following operating costs: B. Depreciation (RM8,000/5 years) Insurance Parking space fee Road tax and license RM 1,600 RM 1,200 RM 360 RM 40 Variable operating cost RM 0.14 per km The variable operating cost consists of petrol, oil, tyres, maintenance and repairs. Chichi estimates that, at her current rate of usage, the car will have zero resale value in five (5) years, so the annual straight-line depreciation is RMI,600. Chichi pay the parking space for a monthly fee.
(c) Chichi is thinking about buying an expensive sport car to replace the car she bought
year. She would drive the same number of km regardless of which car she
owns and would rent the same parking space. The sport car's variable operating
costs would be roughly the same as the variable operating costs of her existing car.
However, her insurance and road tax and license costs would go up. Explain and
identify which costs are relevant in estimating the incremental costs of owning the
more expensive car.
last
Transcribed Image Text:(c) Chichi is thinking about buying an expensive sport car to replace the car she bought year. She would drive the same number of km regardless of which car she owns and would rent the same parking space. The sport car's variable operating costs would be roughly the same as the variable operating costs of her existing car. However, her insurance and road tax and license costs would go up. Explain and identify which costs are relevant in estimating the incremental costs of owning the more expensive car. last
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