esKristen Lu purchased a used automobile for $33,900 at the beginning of last year andincurred the following operating costs:Depreciation ($33,900 ÷ 5 years)InsuranceGarage rentAutomobile tax and licenseVariable operating cost$ 6,780$ 3,500$ 1,800$ 920$ 0.15 per mileThe variable operating cost consists of gasoline, oil, tires, maintenance, and repairs.Kristen estimates, at her current rate of usage, the car will have zero resale value infive years, so the annual straight-line depreciation is $6,780. The car is kept in agarage for a monthly fee.Required:1. Kristen drove the car 26,000 miles last year. Compute the average cost per mile ofowning and operating the car.Note: Round your answers to 2 decimal places.Average fixed cost per mileVariable operating cost per mileAverage cost per mile2. Kristen is unsure about whether she should use her own car or rent a car to go onan extended cross-country trip for two weeks during spring break. What costsabove are relevant in this decision?Note: You may select more than one answer. Single click the box with thequestion mark to produce a check mark for a correct answer and double click thebox with the question mark to empty the box for a wrong answer. Any boxes leftwith a question mark will be automatically graded as incorrect.? Variable operating costs? Depreciation? Automobile tax? License costs? Insurance costs

To compute the average cost per mile of owning and operating the car, we'll first calculate the…

Answered: 1. Kristen drove the car 26,000 miles…

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion

Section: Chapter Questions

Problem 38P

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(b) Chichi is unsure whether she should use her own car or rent a car to go on an extended cross-country trip for two (2) weeks during the mid-term break. Explain and identify which of the above costs are relevant and which are irrelevant in her decision.

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