Kristen Lu purchased a used automobile for $13,650 at the beginning of last year and incurred the following operating costs: Depreciation ($13,650+ 5 years) Insurance $ 2,730 $ 1,400 $700 $ 370 Garage rent Automobile tax and license Variable operating cost $ 0.15 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 $2,730. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 13,000 miles last year. Compute the average cost per mile of owning and operating the car. Note: Round your answers to 2 decimal places. Average fixed cost per mile Var 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? Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect. ? Variable operating costs ?Depreciation ?Automobile tax ? License costs ?Insurance costs
Kristen Lu purchased a used automobile for $13,650 at the beginning of last year and incurred the following operating costs: Depreciation ($13,650+ 5 years) Insurance $ 2,730 $ 1,400 $700 $ 370 Garage rent Automobile tax and license Variable operating cost $ 0.15 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 $2,730. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 13,000 miles last year. Compute the average cost per mile of owning and operating the car. Note: Round your answers to 2 decimal places. Average fixed cost per mile Var 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? Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect. ? Variable operating costs ?Depreciation ?Automobile tax ? License costs ?Insurance costs
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A-5
Transcribed Image Text:Kristen Lu purchased a used automobile for $13,650 at the beginning of last year and incurred the following operating costs:
Depreciation ($13,650 ÷ 5 years)
Insurance
Garage rent
Automobile tax and license
Variable operating cost
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 $2,730. The car is kept in a garage for a
monthly fee.
Required:
1. Kristen drove the car 13,000 miles last year. Compute the average cost per mile of owning and operating the car.
Note: Round your answers to 2 decimal places.
Average 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?
Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct
answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question
mark will be automatically graded as incorrect.
? Variable operating costs
?Depreciation
$ 2,730
$ 1,400
$700
$370
$ 0.15 per mile
?Automobile tax
? License costs
? Insurance costs
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