Willie Lohmann travels from city to city for busi- ness. Every other year he buys a used car for about $15,000. The dealer allows about $8000 as a trade-in allowance, so Willie spends $7000 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 $3500 each year for the car's decline in value. B. Standard mileage rate: Willie will receive 56.5¢ per mile but no operating expenses and no depre- ciation allowance. If Willie travels 18,000 miles per year, which method gives him the larger reimbursement? At what annual mileage do the two methods give the same reimbursement?

Willie Lohmann travels from city to city for busi- ness. Every other year he buys a used car for about $15,000. The dealer allows about $8000 as a trade-in allowance, so Willie spends $7000 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 $3500 each year for the car's decline in value. B. Standard mileage rate: Willie will receive 56.5¢ per mile but no operating expenses and no depre- ciation allowance. If Willie travels 18,000 miles per year, which method gives him the larger reimbursement? At what annual mileage do the two methods give the same reimbursement?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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