Business Math

Chantal Jones purchased a new two-door coupe for $24,590 two years ago. She drove 14,322 miles last year and kept a record of all auto expenses. She estimates the vehicle’s present value at $19,219.Calculate her (a) depreciation, (b) total variable costs, (c) total fixed costs, and (d) cost per mile to operate her vehicle last year.

Step 1: Compute the annual depreciation

Annual Depreciation =

Purchase Price – Today’s Value

Number of Years Owned

= $24,590.00 – $19,219.00/2=

$5,371.00/2

= $2,685.50

Step 2: Total Variable Costs = $1,576.24 + 71.85 + 154.36 + 322.65 = $2,125.10

Step 3: Total Fixed Costs = $985 + 125.63 + 380.30 + 2,685.50 = $4,176.43

Step 4: Compute the Cost per Mile

Cost per Mile = Annual Variable Cost + Annual Fixed Cost/Number of Miles

= $2,125.10 + $4,176.43/14,322.00

= $6,301.53/14,322.00

= $0.43999

= $0.44

a. $4,533.33 b. $8,095.83 c. $0.67 or 67¢

Let x = Annual variable cost Cost per Mile = Annual Variable Cost + Annual Fixed Cost Number of Miles

$0.30 = x + $2,400 15,000

4,500 = x + $2,400

$2,100 = x

Tiffany must have annual variable costs of $2,100 or less.

Let x = Annual variable cost

Cost per Mile =

Annual Variable Cost + Annual Fixed Cost/Number of Miles

$0.30 = (x + $3,000) ÷18,500 ; $5,550 = x + $3,000;

$2,550 = x

a. $0.29