Extended cross country trip

Reference no: EM13972389

Problem:

Kristen Lu purchased a used automobile for $23,750 at the beginning of last year and incurred the following operating costs

Depreciation ($23,750 / 5 years)	$4,750
Insurance	$2,500
Garage Rent	$1,300
Automobile tax and license	$650
Variable operating cost	$0.11 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 $4,750. The car is kept in a garage for monthly fee.

Required:

1. Kristen drove the car 23,000 miles last year. Compute the average cost per mile of owning and operating the car.

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?

Reference no: EM13972389

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