Cost-volume-profit analysis can also be used in making personal financial decisions. Suppose you are considering purchasing a hybrid vehicle. The hybrid car will initially cost $ 5,400 above the cost of a traditional vehicle. The hybrid provides 40 miles per gallon of gas, while the traditional car only provides 30 miles per gallon. Assume the cost of gas is $ 2.40 per gallon.

REQUIRED: Using the data above, answer the following questions.

(1) What is the variable cost of gasoline per mile with the hybrid car and for the traditional car?

(2) Using the information from question (1), if "miles" is your unit of measure, what is the "contribution margin" of the hybrid vehicle relative to the traditional vehicle? That is, express variable cost savings on a per mile basis.

(3) How many miles would you have to drive in order to break even on your investment in the hybrid car? NOTE: Break-even point is reached where the total fuel savings equals the additional cost of purchasing the hybrid car.

(4) What other factors should you consider when making the decision about this purchase: hybrid versus traditional?