FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Kristen Lu purchased a used automobile for $8,350 at the beginning of last year and incurred the following operating costs:
| $ 1,670 | ||
| Insurance | $ 900 | |
| Garage rent | $ 500 | |
| Automobile tax and license | $ 230 | |
| Variable operating cost | $ 0.11 | 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 $1,670. The car is kept in a garage for a monthly fee.
Required:
1. Kristen drove the car 11,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.)
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 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.)
check all that apply
- Variable operating costs
- Depreciationunanswered
- Automobile taxunanswered
- License costsunanswered
- Insurance costs
Transcribed Image Text:Kristen Lu purchased a used automobile for $8,350 at the beginning of last year and incurred the following operating costs:
Depreciation ($8,350 ÷ 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 $1,670. The car is kept in a garage for a
monthly fee.
Required:
1. Kristen drove the car 11,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your
answers to 2 decimal places.)
Average fixed cost per mile
Variable operating cost per mile
Average cost per mile
$ 1,670
$ 900
$ 500
$ 230
$ 0.11 per mile
$
$
$
0.80
0.11
0.91
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