Answer:
$8,220
Explanation:
The computation of the total annual operating cost is shown below:
= Fixed cost + variable cost
where,
Fixed cost = Annual depreciation + Annual loan interest + insurance + license and registration fees
= $3,000 + $710 + $860 + $125
= $4,695
And, the variable cost
= Gasoline expense + Parking or tolls + Oil changes or repairs
where,
Gasoline expense is
= (Annual mileage ÷ miles per gallon) × average price per gallon
= ($14,640 ÷ 24) × $3.50 per gallon
= $2,135
Parking or tolls = $660
And, the Oil changes or repairs is $730
So, the variable cost is
= $2,135 + $660 + $730
= $3,525
So, the total annual operating cost is
= $4,695 + $3,525
= $8,220
Therefore, The total annual operating cost is a mix of fixed cost and the variable cost
