Suppose you are considering the purchase of 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 gasoline, while the traditional car only supplies 30 miles per gallon. Assume that the cost of gas is $ 2.40 per gallon.

REQUIRED: Using the above data, 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 in question (1), if "miles" is your unit of measure, what is the "contribution margin" of the hybrid vehicle in relation to the traditional vehicle? That is, express the savings in variable costs based on each mile.

(3) How many miles would you have to drive in order to reach the breakeven point in your investment in the hybrid car? NOTE: The equilibrium point is reached where the total fuel savings is equal to the additional cost of acquiring the hybrid car.

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