Question
Kristen Lu purchased a used automobile for $11,450 at the beginning of last year and incurred the following operating costs: Depreciation ($11,450 5 years) $2,290
Kristen Lu purchased a used automobile for $11,450 at the beginning of last year and incurred the following operating costs: |
Depreciation ($11,450 5 years) | $2,290 |
Insurance | $1,200 |
Garage rent | $600 |
Automobile tax and license | $310 |
Variable operating cost | $0.14 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 $2,290. The car is kept in a garage for a monthly fee. |
Required: |
1. | Kristen drove the car 11,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.)
|
Bill has just returned from a duck hunting trip. He has brought home eight ducks. Bills friend, John, disapproves of duck hunting, and to discourage Bill from further hunting, John has presented him with the following cost estimate per duck: |
Camper and equipment: | ||
Cost, $1,400; usable for eight seasons; 10 hunting trips per season | $ | 140.00 |
Travel expense (pickup truck): | ||
100 miles at $0.44 per mile (gas, oil, and tires$0.24 per mile; depreciation and insurance $0.20 per mile) | 44.00 | |
Shotgun shells (two boxes) | 20.00 | |
Boat: | ||
Cost, $2,320, usable for eight seasons; 10 hunting trips per season | 29.00 | |
Hunting license: | ||
Cost, $60 for the season; 10 hunting trips per season | 6.00 | |
Money lost playing poker: | ||
Loss, $26 (Bill plays poker every weekend) | 26.00 | |
Bottle of whiskey: | ||
Cost, $15 (used to ward off the cold) | 15.00 | |
Total cost | $ | 280.00 |
Cost per duck ($280.00 8 ducks) | $ | 35.00 |
Required: | |
1. | Assuming that the duck hunting trip Bill has just completed is typical, what costs are relevant to a decision as to whether Bill should go duck hunting again this season? |
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