Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options. Suppose that you are considering the purchase of a hybrid vehicle. Let's assume the following facts. The hybrid will initially cost an additional $5,000 above the cost of a traditional vehicle. On average, the hybrid will get 60 miles per gallon of gas, and the traditional car will get 30 miles per gallon. Also, assume that the cost of gas is $1.20 per gallon. Using the facts above, answer the following questions. (a) Your answer is correct. For gasoline, what is the unit variable cost of going one mile in the hybrid car? What is the unit variable cost of going one mile in the traditional car? (Round answers to 2 decimal places, e.g. 0.25.) Variable gasoline cost Hybrid car 0.02 $ Traditional car 0.04
Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options. Suppose that you are considering the purchase of a hybrid vehicle. Let's assume the following facts. The hybrid will initially cost an additional $5,000 above the cost of a traditional vehicle. On average, the hybrid will get 60 miles per gallon of gas, and the traditional car will get 30 miles per gallon. Also, assume that the cost of gas is $1.20 per gallon. Using the facts above, answer the following questions. (a) Your answer is correct. For gasoline, what is the unit variable cost of going one mile in the hybrid car? What is the unit variable cost of going one mile in the traditional car? (Round answers to 2 decimal places, e.g. 0.25.) Variable gasoline cost Hybrid car 0.02 $ Traditional car 0.04
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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do part B
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Transcribed Image Text:Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of
your biggest personal expenditures. It is important that you carefully analyze your options.
Suppose that you are considering the purchase of a hybrid vehicle. Let's assume the following facts. The hybrid will initially cost an
additional $5,000 above the cost of a traditional vehicle. On average, the hybrid will get 60 miles per gallon of gas, and the traditional
car will get 30 miles per gallon. Also, assume that the cost of gas is $1.20 per gallon.
Using the facts above, answer the following questions.
(a)
Your answer is correct.
For gasoline, what is the unit variable cost of going one mile in the hybrid car? What is the unit variable cost of going one mile in
the traditional car? (Round answers to 2 decimal places, e.g. 0.25.)
Variable gasoline cost
Hybrid car
0.02
$
Traditional car
0.04
Transcribed Image Text:(b)
Using the information in above part, if "miles" is your unit of measure, what is the differential between the hybrid vehicle and the
traditional vehicle? That is, express the variable cost savings on a per-mile basis. (Round answer to 2 decimal places, e.g. 0.25.)
Savings per mile
$
C
A
C
A
C
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