Kristen Lu purchased a used automobile for $14,500 at the beginning of last year and incurred the following operating costs: Depreciation ($14,500 ÷ 5 years) Insurance Garage rent Automobile tax and license Variable operating cost $ 2,900 $ 1,500 $ 800 $ 400 $ 0.07 per mile The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usage, the car will have zero resale value in five years, so the annual straight-line depreciation is $2,900. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 14,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Average fixed cost per mile Variable operating cost per mile Average cost per mile 2. Kristen is unsure about whether she should use her own car or rent a car to go on an extended cross-country trip for two weeks during spring break. What costs above are relevant in this decision? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Variable operating costs ? Depreciation ? Automobile tax ? License costs ? Insurance costs
Kristen Lu purchased a used automobile for $14,500 at the beginning of last year and incurred the following operating costs: Depreciation ($14,500 ÷ 5 years) Insurance Garage rent Automobile tax and license Variable operating cost $ 2,900 $ 1,500 $ 800 $ 400 $ 0.07 per mile The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usage, the car will have zero resale value in five years, so the annual straight-line depreciation is $2,900. The car is kept in a garage for a monthly fee. Required: 1. Kristen drove the car 14,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.) Average fixed cost per mile Variable operating cost per mile Average cost per mile 2. Kristen is unsure about whether she should use her own car or rent a car to go on an extended cross-country trip for two weeks during spring break. What costs above are relevant in this decision? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) Variable operating costs ? Depreciation ? Automobile tax ? License costs ? Insurance costs
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
Please help me solve both questions
Transcribed Image Text:Kristen Lu purchased a used automobile for $14,500 at the beginning of last year and incurred the following operating costs:
Depreciation ($14,500 ÷ 5 years)
Insurance
Garage rent
Automobile tax and license
Variable operating cost
$ 2,900
$ 1,500
$ 800
$ 400
$ 0.07 per mile
The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usage,
the car will have zero resale value in five years, so the annual straight-line depreciation is $2,900. The car is kept in a garage for a
monthly fee.
Required:
1. Kristen drove the car 14,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your
answers to 2 decimal places.)
Average fixed cost per mile
Variable operating cost per mile
Average cost per mile
2. Kristen is unsure about whether she should use her own car or rent a car to go on an extended cross-country trip for two weeks
during spring break. What costs above are relevant in this decision? (You may select more than one answer. Single click the box with
the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box
for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
Variable operating costs
? Depreciation
? Automobile tax
? License costs
? Insurance costs
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education