The petroleum firm noted in Question 7 was trying to decide which method to use to reimburse the sales reps for the use of their cars on business. Each rep traveled about 15,000 miles a year. The company was computing the costs on the assumption that the reps drove midsized cars. The following payment methods were under consideration.

What would be the total annual cost to the firm under each of the three proposals?

a) A straight 40 cents a mile.

b) $300 a month plus 18 cents a mile.

c) The Runzheimer plan. (Use Figure 10–7 and information in the text.) Assume that the 300-rep sales force was equally divided among territories based around Detroit and St. Louis.