Kristen Lu purchased a used automobile for $16,250 at the beginning of last year

Question

Kristen Lu purchased a used automobile for $16,250 at the beginning of last year and incurred the following operating costs $3,250 $1,700 $900 $450 S0.13 per mile Depreciation ($16,250 Insurance 5 years) 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 $3,250. The car is kept in a garage for a monthly fee Required 1. Kristen drove the car 21,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Fixed cost per mile Variable operating cost per mile Average cost per mile 0.00

Explanation / Answer

Fixed cost per mile = $      0.30 per mile Variable operating cost per mile = $      0.13 per mile Average cost per mile = $      0.43 per mile Fixed cost per mile: Depreciation = $   3,250 Insurance = $   1,700 Garage rent = $       900 Automobile tax and license = $       450 (a) Total fixed cost = $   6,300 (b) Total miles drove last year = $ 21,000 (a) / (b) Fixed cost per mile = $      0.30 per mile

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