Kristen Lu purchased a used automobile for $29,900 at the beginning of last year and...
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Accounting
Kristen Lu purchased a used automobile for $29,900 at the beginning of last year and incurred the following operating costs:
Depreciation ($29,900 5 years) $ 5,980
Insurance $ 3,100
Garage rent $ 1,600
Automobile tax and license $ 820
Variable operating cost $ 0.09 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 $5,980. The car is kept in a garage for a monthly fee.
1. Kristen drove the car 23,000 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=
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? Assume that there is no decrease in the resale value of the car due to its use. (You may select more than one answer)
Variable operating costs
Depreciation
Automobile tax
License costs
Insurance costs
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