Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one ofyour 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 anadditional $7,000 above the cost of a traditional vehicle. On average, the hybrid will get 60 miles per gallon of gas, and the traditionalcar will get 30 miles per gallon. Also, assume that the cost of gas is $2.40 per gallon.Using the facts above, answer the following questions.(a)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 inthe traditional car? (Round answers to 2 decimal places, e.g. 0.25.)Hybrid carTraditional carVariable gasoline cost$$Save for LaterAttempts: 0 of 1 usedSubmit Answer

Variable cost is the cost that changes with change in the activity of cost driver used. The variable…

Answered: Cost-volume-profit analysis can also be…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Your business is considering the selection of hybrid trucks as an alternative to conventional gasoline powered trucks. Based on the following data, should the hybrid trucks be selected over conventional? Use incremental rate of return analysis.
A carsharing organization is considering adding a new line of luxury cars to their offering. Thecarsharing rate structure is based on cost per hour and miles driven. Assume $4/gallon forgas. The chosen vehicle is a McMaster EP-1 sedan, which costs $52,400 new. Fueleconomy according to the Canadian government is 20 mpg city and 29 mpg highway, for acombined fuel economy of 24 mpg; you can use the 24 mpg value for purposes of calculatingfuel costs in the problem.Since the vehicle is valuable, collision insurance is expensive, so the insurance cost is $4,800per year. The organization buys the vehicle from a dealer with an auto loan at 3.9% interest,with one annual payment per year. After 5 years of useful life, they sell the vehicle for$25,000, which can also be annualized at a 3.9% discount rate. Maintenance is expected tocost $800 per year. The car is expected to be driven by members 15,000 miles per year, andeach hour of reservation is expected to generate 6 miles of driving.The…
using excelAssume you've graduated and get the dream job and need transportation to go to work (problem definition)-so you need to purchase a car (objective).You would like to analyze your financial options to purchase the car you want andat the same time spent the minimum possible (decision making criteria).You prefer to pay around 3000$/year (requirements)but if it helps to reduce the cost you can pay more.Explore the options of (compare alternatives to save $) 1- Getting a loan of 20K over 5 years at 5%, how much is your yearly payments. Hint: (=PMT(i,n,p) ) 2- Searching for a better loan at 4%- how much you save? (compare total interest paid I1-I2)3- Try to pay up your loan quicker like 3 years- See how much you save in Interest paid. (compare total interest paid ) 4 - Negotiated the purchase down to 18.5K and see how much you save in interest. (compare total interest paid as well as the total paid) 5- Put down more money at the…
Hybrid cars are touted as a "green" alternative; however, the financial aspects of hybrid ownership are not as clear. Consider the 2020 Edsel 550h, which had a list price of $5,000 (including tax consequences) more than the comparable gasoline-only Edsel 550. Additionally, the annual ownership costs (other than fuel) for the hybrid were expected to be $310 more than the traditional sedan. The EPA mileage estimate was 25 mpg for the hybrid and 17 mpg for the traditional sedan. a.Assume that gasoline costs $3.00 per gallon and you plan to keep either car for six years. How many miles per year would you need to drive to make the decision to buy the hybrid worthwhile, ignoring the time value of money? (Do not round intermediate calculations and round your answer to nearest whole number, e.g., 32.)b.If you drive 14,000 miles per year and keep either car for six years, what price per gallon would make the decision to buy the hybrid worthwhile, ignoring the time value of money? (Do not round…
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More real estate Consider the Albuquerque home sales from Exercise 29 again. The regression analysis gives the model Price = 47.82 + 0.061 Size. a) Explain what the slope of the line says about housing prices and house size. b) What price would you predict for a 3000-square-foot house in this market? c) A real estate agent shows a potential buyer a 1200-square- foot home, saying that the asking price is $6000 less than what one would expect to pay for a house of this size. What is the asking price, and what is the $6000 called?
Sampson Corporation is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are shown next: Possible Market Reaction Low response Moderate response High response Very high response Sales in Units 40 Probabilities 0.30 70 0.20 90 120 0.20 0.30 a. What is the expected value of unit sales for the new product? Note: Do not round Intermediate calculations and round your answer to the nearest whole unit.) Answer is complete but not entirely correct. Expected value 70 units b. What is the standard deviation of unit sales? Note: Do not round Intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Standard deviation 19.24 units
13. Fenton andFarrah Frien dly, husband-and-wife car dealers, are soon going to open anew dealership. They have three offers: from a foreign compact car company, from a U.S.-produ cer of full-sized cars, and from a tru ck company. The success of each type of dealership will depend on how much gasoline is going to be available during the nextfew years. The profit from each type of dealership, given the availability of gas, is shown in thefollowing payoff table: Gasoline Availability Shortage Surplus Dealership .6 .4 Compact cars $ 300,000 $150,000 Full-sized cars -100,000 600,000 Trucks 120,000 170,000 Determine which type of car dealership should the couple purchase.
1
Harry is trying to evaluate a two year project using NPV. There is uncertainty as to the level of sales (in units) in each of the two years: Year 1 Sales units Probability Year 2 Sales units Probability 10,000 0.3 8,000 0.2 10,000 0.8 15,000 0.7 20,000 0.6 10,000 0.4 Required: (a) On what expected level of sales in Year 1 and 2 should Harry base his NPV calculation? (b) Imagine that the project outlay is £230,000 and each unit sold has a contribution of £10. If Harry’s cost of capital is 10%, what is the project’s…
Net Present Value and Internal Rate of Return. Below are the projected revenues and expenses for a new clinical nurse specialist program being established by your healthcare organization. The nurses would provide education while patients are in the hospital and home visits are on a fee-for-service basis after patients have been discharged Should the hospital undertake the program if its required rate of return is 12%? Note: it must be assumed that the revenues and costs in this problem represent cash flows. Present value analysis is based on cash, not revenue or expenses. Provide a response to support the findings in the table listed below. Your response should be at least a half page long in addition to the table. Please include citations. Year One Year Two Year Three Year Four Total Revenue $100,000 $150,000 $200,000 $250,000 $700,000 Costs $150,000 $150,000 $150,000 $150,000 $600,000 $ <50,000> $0 $50,000 $100,000…
Could someone help me with their input on this question please. What is the difference between a fixed and variable cost associated with owning a vehicle? How should a person prepare to buy a car?

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