purchased 20250

depreciation 20250 5 $ 4,050.00

Insurance $ 2,100.00
garage rent $ 1,100.00
Autombile tax and license $ 550.00
Variable operating cost $ 0.09

time 5
SLM 4050

q1 26000
q2
q3

Solution

Ques 1

Fixed cost per mile $ 0.30

Variable operating cost per mile $ 0.09
Average cost per mile $ 0.39

Working
Fixed cost per mile calculation
Depreciation $ 4,050.00
Insurance $ 2,100.00
Garage rent $ 1,100.00
Automobile tax and license $ 550.00
total $ 7,800.00
Divided by miles 26,000
Cost per mile $ 0.30

Ques 2

Option A:variable operating costs

Because
a)Depreciaiton is sunk cost/historical cost
b)Insurance cost is irrelevant cost
c)Automobile tax and license cost is also irrelevant cost
d)garge rent is relevant if she drives her own car but this is not mentioned in options