Problem 3 Willie Lohmann travels from city to city in the co

Problem 3 Willie Lohmann travels from city to city in the conduct of his business. Every other year he buys a used car for about $15,000. The auto dealer allows about $8000 as a trade-in allowance, with the result that salesman Willie spends $7000 every other year for a car 5 Willie keeps accurate records, which show that all other expenses on his car amount to 32.3 cents ($0.323) per mile for each mile he drives. Willie\'s employer has two plans by which salesmen are reimbursed for their car expenses: Willie will receive all his operating expenses, and in addition will receive $3500 each year for the decline in value of the automobile. Willie will receive 52 cents ($0.52) per mile but no operating expenses and no depreciation allowance a) If Willie travels 18,000 miles per year, which method of computation gives him the larger reimbursement? b) At what annual mileage do the two methods give the same reimbursement? 92

Solution

Answer:-

In case of itemized expenses:- $0.323*18000+$3500 =$9314

Standard Mileage Rate =$0.52*18000= $9360

So from above, it is clear that Standard Mileage Rate provides better reimbursement.

Answer:- Let us consider that M is the mileage at which the same amount is received.

0.323*M+$2000=$0.52*M

M=2000/0.197=10152.28 miles

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