A 1-58 Willie Lohmann travels from city to city for busi- ness. Every other year he buys a used car for about $18,000. The dealer allows about $8000 as a trade-in allowance, so Willie spends $10,000 every other year for a car. Willie keeps accurate records of his expenses, which total 32.3 per mile. Willie's employer has two plans to reimburse car expenses: A. Actual expenses: Willie will receive all his oper- ating expenses, and $3650 each year for the car's decline in value. B. Standard mileage rate: Willie will receive 54.5¢ per mile but no operating expenses and no depreciation allowance. If Willie travels 15,000 miles per year, which method gives him the larger reimbursement? At what annual mileage do the two methods give the same reimbursement?

A 1-58 Willie Lohmann travels from city to city for busi- ness. Every other year he buys a used car for about $18,000. The dealer allows about $8000 as a trade-in allowance, so Willie spends $10,000 every other year for a car. Willie keeps accurate records of his expenses, which total 32.3 per mile. Willie's employer has two plans to reimburse car expenses: A. Actual expenses: Willie will receive all his oper- ating expenses, and $3650 each year for the car's decline in value. B. Standard mileage rate: Willie will receive 54.5¢ per mile but no operating expenses and no depreciation allowance. If Willie travels 15,000 miles per year, which method gives him the larger reimbursement? At what annual mileage do the two methods give the same reimbursement?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 1.1CE: What life cycle cost concept begins raising concerns by year 5 with any electric vehicle (EV)? If...

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