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
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 $6,000 above the cost of a traditional vehicle. The hybrid will get 30 miles per gallon of gas, and the traditional car will get 20 miles per gallon. Also, assume that the cost of gas is $2.40 per gallon.
Variable gasoline cost
- Hybrid car is 0.08$
- Traditional car is 0.12
- The "contribution margin" of the hybrid vehicle relative to the traditional vehicle savings per mile is $0.04
How many miles would you have to drive in order to break even on your investment in the hybrid car? (Round answer to 0 decimal places, e.g. 5,275.).
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