Kristen Lu purchased a used automobile for $25,950 at the beginning of last year and incurred the following operating costs: Depreciation ($25,950 + 5 years) $ 5,190 $ 2,700 Insurance. Garage rent $ 1,400 Automobile tax and license $ 710 Variable operating cost $ 0.06 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 $5,190. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 20,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Average fixed cost per mile Variable operating cost per mile Average cost per mile 25,400.00 $1,200.00 26,600.00
Kristen Lu purchased a used automobile for $25,950 at the beginning of last year and incurred the following operating costs: Depreciation ($25,950 + 5 years) $ 5,190 $ 2,700 Insurance. Garage rent $ 1,400 Automobile tax and license $ 710 Variable operating cost $ 0.06 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 $5,190. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 20,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Average fixed cost per mile Variable operating cost per mile Average cost per mile 25,400.00 $1,200.00 26,600.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Kristen Lu purchased a used automobile for $25,950 at the beginning of last year and incurred the following operating costs:
Depreciation ($25,950+ 5 years)
$ 5,190
$ 2,700
Insurance.
$ 1,400
$ 710
$ 0.06 per mile
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 $5,190. The car is kept in a garage for a
monthly fee.
Required:
1. Kristen drove the car 20,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your
answers to 2 decimal places.)
Answer is complete but not entirely correct.
Average fixed cost per mile
Variable operating cost per mile
Average cost per mile
25,400.00
$1,200.00
$
26,600.00
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