Question

Kristen Lu purchased a used automobile for 8,000 at the beginning of last year and incurred the following operating costs:

Answer 1

Depreciation = 8000/5 = 1600

Insurance = 1200

Garage Rent = 360

Automobile tax and license = 40

Variable operating cost = 0.14 per mile

Variable operating costs include gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at its current usage rate, the car will have zero resale value in five years, so the annual straight-line depreciation is $1,600. Cars are garaged for a monthly fee.

Requirement:

Kristen drove the car 10,000 miles last year. Compute the average cost per mile of owning and operating the car.

(Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Fixed cost per mile (3,200 ÷ 10,000 miles) = 0.32

Variable operating cost per mile =                  0.14

Average cost per mile =                                  0.46 (0.32 + 0.14)

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