Problem 711 Aldo Redondo drives his own car on company busin

Problem 7-11 Aldo Redondo drives his own car on company business. His employer reimburses him for such travel at the rate of 47 cents per mile. Aldo estimates that his fixed costs per year such as taxes, insurance, and depreciation are $2,200. The direct or variable costs such as gas, oil, and maintenance average about 20.0 cents per mile. How many miles must he drive to break even? (Do not round intermediate calculations. Roundup your answer to the next whole number.) Break even point miles

Solution

Fixed cost = $2200

Price paid per mile = 47 cents or $.47

Variable cost per mile = 20 cents or $.2

Breakeven point = Fixed cost / (price per mile – variable cost per mile)

Breakeven point = 2200/(.47-.2)

Breakeven point = 8148.15 or 8149 miles