Kristen Lu purchased a used automobile for $11,900 at the beginning of last year and incurred the following operating costs: Depreciation ($11,900 + 5 years) Insurance Garage rent Automobile tax and license Variable operating cost $ 2,380 $ 1,200 $ 600 $ 320 $ 0.07 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 $2,380. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 15,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Average fixed cost per mile Variable operating cost per mile Average cost per mile 2. Kristen is unsure about whether she should use her own car or rent a car to go on an extended cross-country trip for two weeks during spring break. What costs above are relevant in this decision? Assume that there is no decrease in the resale value of the car due to its use. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) 7 Variable operating costs Depreciation Automobile tax License costs Insurance costs Thalassines kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows: Thalassines Kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales $ 440,000 Variable expenses : Variable manufacturing expenses $ 136,000 Sales commissions 48,000 Shipping 18,000 Total variable expenses 202,000 Contribution margin 238,000 Fixed expenses: Advertising (for the bilge pump product line) 27,000 Depreciation of equipment (no resale value) 102,000 General factory overhead Salary of product-line manager 115,000 Insurance on inventories 6,000 Purchasing department 60,000+ Total fixed expenses 347,000 Net operating loss $(109,000) 37,000 Common costs allocated on the basis of machine-hours. Common costs allocated on the basis of sales dollars. Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Department expenses. Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line
