Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a
Question:
Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options.
Suppose that you are considering the purchase of a hybrid vehicle. Let's assume the following facts. The hybrid will initially cost an additional $5,000above the cost of a traditional vehicle. The hybrid will get30miles per gallon of gas, and the traditional car will get24miles per gallon. Also, assume that the cost of gas is $2.40per gallon.
Using the facts above, answer the following questions.
Using the information in part (a), if "miles" is your unit of measure, what is the "contribution margin" of the hybrid vehicle relative to the traditional vehicle? That is, express the variable cost savings on a per-mile basis.(Round answer to 2 decimal places, e.g. 0.25.)
The savings per mile