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The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usag the car will have
The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usag the car will have zero resale value in five years, so the annual straight-line depreciation is $3,510. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 23,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) 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 $3,510. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 23,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) 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? (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.) Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.10 as shown below: If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $127,800 ) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $89,000 per period. Depreciation is due to obsolescence rather than wear and tear. Required: What is the financial advantage (disadvantage) of making the 71,000 starters instead of buying them from an outside supplier
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