A practicing doctor now spends Rs. 12 per km on taxi fare for his visit to patients residence. He is considering two other alternatives, the purchase of a new small car or an old big car. The estimated cost figures are:

New small car

Old big car

Fixed Expenses

Rs. 60,000

Rs. 45,000

Petrol consumption, per litre

10k.m.

7 K.m.

Cost of petrol per litre

Rs. 70.00

Rs. 70.00

He estimates that he runs 12,000 km annually.

Decide: a. Which of the alternatives will be cheaper?

b. If his practice increases and he has to run 20,000 km p.a., What he should opt for out of these three?

c. At how many km per annum will the cost of the two cars break- even? What should be his decision?