She can drive her existing car or take the budget

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Unformatted text preview: la Lumpur. She can drive her existing car or take the budget airline. By car, it is 230 miles to her friend’s apartment. She is trying to decide which alternative is less expensive and has gathered the following information: Automobile Costs (based on 10,000 miles driven per year) 1 2 3 4 5 6 Annual straight-line depreciation on car Cost of gasoline Annual cost of auto insurance and license Maintenance and repairs Parking fees at school Total average cost $45 per month × 8 months Annual Cost of Fixed Items $ 2,800 1,380 360 Cost per Mile $ 0.280 0.100 0.138 0.065 0.036 $ 0.619 $2.70 per gallon ÷ 27 MPG $24,000 cost – $10,000 salvage value ÷ 5 years Identifying Relevant Costs Automobile Costs (based on 10,000 miles driven per year) 1 2 3 4 5 6 7 8 9 10 11 12 13 Annual straight-line depreciation on car Cost of gasoline Annual cost of auto insurance and license Maintenance and repairs Parking fees at school Total average cost Annual Cost of Fixed Items $ 2,800 1,380 360 Some Additional Information Reduction in resale value of car per mile of wear Round-tip airfare Benefits of relaxing on plane trip Cost of putting dog in kennel while gone Benefit of having car in Kuala Lumpur Hassle of parking car in Kuala Lumpur Per day cost of parking car in Kuala Lumpur Cost per Mile $ 0.280 0.100 0.138 0.065 0.036 $ 0.619 $ 0.026 $ 104 ???? $ 40 ???? ???? $ 25 Identifying Relevant Costs Relevant Financial Cost of Driving Gasoline (460 @ $0.100 per mile) Maintenance (460 @ $0.065 per mile) Reduction in resale (460 @ $0.026 per m...
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This document was uploaded on 03/06/2014.

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