You just bought a motorcycle for $8,000. You plan to ride the motorcycle for two years, and then sell it for $3,200. During this two-year period, you expect to ride the motorcycle 10,000 miles each year, and you expect the motorcycle to get 50 miles per gallon of gasoline. The annual cost of insurance is $960, registration costs are $80 (good for two years), and the price of gasoline is $2.50 per gallon. During this same two-year period, you will need to service your motorcycle five times, at $240 per service check, and obtain five oil changes. Each oil change costs $35. You will also need to replace your tires once during this two-year period, for a total cost of $400. a. Calculate the total fixed cost, total variable cost, and cost per mile for the two-year period, and then complete the table below. Instructions: Round your answers for total fixed cost and total variable cost to the nearest whole number. Round your answer for cost per mile to two decimal places. Cost per Mile $ b. Suppose you want to lower the cost per mile. You should focus on: Total Fixed Cost Total Variable Cost O variable costs, because they can be avoided. fixed costs, because they represent a majority of the total costs. O variable costs, because they represent a majority of the total costs. O fixed costs, because they must be paid.
You just bought a motorcycle for $8,000. You plan to ride the motorcycle for two years, and then sell it for $3,200. During this two-year period, you expect to ride the motorcycle 10,000 miles each year, and you expect the motorcycle to get 50 miles per gallon of gasoline. The annual cost of insurance is $960, registration costs are $80 (good for two years), and the price of gasoline is $2.50 per gallon. During this same two-year period, you will need to service your motorcycle five times, at $240 per service check, and obtain five oil changes. Each oil change costs $35. You will also need to replace your tires once during this two-year period, for a total cost of $400. a. Calculate the total fixed cost, total variable cost, and cost per mile for the two-year period, and then complete the table below. Instructions: Round your answers for total fixed cost and total variable cost to the nearest whole number. Round your answer for cost per mile to two decimal places. Cost per Mile $ b. Suppose you want to lower the cost per mile. You should focus on: Total Fixed Cost Total Variable Cost O variable costs, because they can be avoided. fixed costs, because they represent a majority of the total costs. O variable costs, because they represent a majority of the total costs. O fixed costs, because they must be paid.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:You just bought a motorcycle for $8,000. You plan to ride the motorcycle for two years, and then sell it for $3,200. During this two-year
period, you expect to ride the motorcycle 10,000 miles each year, and you expect the motorcycle to get 50 miles per gallon of
gasoline. The annual cost of insurance is $960, registration costs are $80 (good for two years), and the price of gasoline is $2.50 per
gallon.
During this same two-year period, you will need to service your motorcycle five times, at $240 per service check, and obtain five oil
changes. Each oil change costs $35. You will also need to replace your tires once during this two-year period, for a total cost of $400.
a. Calculate the total fixed cost, total variable cost, and cost per mile for the two-year period, and then complete the table below.
Instructions: Round your answers for total fixed cost and total variable cost to the nearest whole number. Round your answer for cost
per mile to two decimal places.
Total Fixed Cost
Total Variable Cost
Cost per Mile
$4
$
2$
b. Suppose you want to lower the cost per mile. You should focus on:
variable costs, because they can be avoided.
fixed costs, because they represent a majority of the total costs.
variable costs, because they represent a majority of the total costs.
fixed costs, because they must be paid.
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