Willie Lohmann travels from city to city for business. 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 business. 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?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Willie Lohmann travels from city to city for business. 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?
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