Kristen lu purchased a used automobile for 18950 Kristen lu

Kristen Lu purchased a used automobile for $18,950 at the beginning of last year and incurred the following operating costs Depreciation ($18,950 5 years) Insurance Garage rent Automobile tax and license Variable operating cost $3,790 $1,900 $1,000 $510 $0.13 per mile 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 $3,790. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 18,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Fixed cost per mile Variable operating cost per mile Average cost per mile 2. Kristen is unsure about whether she should use her own car or rent a car to go on an extended cross in this decision? (You country trip for two weeks during spring break. What costs above are relevant may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.) Variable operating costs Depreciation Automobile tax License costs Insurance costs

Solution

1) Calculate following :

2) Relevant cost for decision in variable operating costs

So answer is a) Variable operating costs

Fixed cost per mile (7200/18000)	0.40
Variable operating cost per mile	0.13
Average cost per mile	0.53