Reference no: EM132787997

Question - Kristen Lu purchased a used automobile for $25,100 at the beginning of last year and incurred the following operating costs:

Depreciation ($25,100 ÷ 5 years) $5,020

Insurance $2,600

Garage rent $1,300

Automobile tax and license $680

Variable operating cost $0.05 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 $5,020. The car is kept in a garage for a monthly fee.

Required - Kristen drove the car 24,000 miles last year. Compute the average cost per mile of owning and operating the car.