Response to the following problem:
Data $
Cost of motor car 5,500.00
Trade-in-price after 2 years or 60,000 miles is expected to be 1,500.00
Maintenance - 6 monthly service costing 60.00
Spares/replacement parts, per 1000 miles 20.00
Vehicle licence, per annum 80.00
Insurance, per annum 150.00
Tyre replacements after 25 000 miles, four at $37.50 each
Petrol, per gallon 1.90
Average mileage from one gallon is 25 miles
Required:
A. From the above data prepare the following:
I. A schedule to be resented to management showing for the mileages of 5000, 10 000 and 30 000 miles per annum.
1) Total variable cost.
2) Total fixed cost
3) Total cost
4) Variable cost per mile in cents (to the nearest cent).
5) Fixed cost per mile in cents (to the nearest cent).
6) Total cost per mile in cents (to the nearest cent).
NB. If in classifying the costs, you consider that some can be treated as either variable or fixed, state the assumption(s) on which your answer is based together with the brief supporting reason(s).
II. On graph paper plot the information given in your answer to (I) above for the costs listed against (1), (2), (3) and (6).
III. To read off from the graph(s) in (II) and state the approximate total costs applicable to 18 000 miles and 25 000 miles and the total cost per mile at these two mileages.
B. ‘The more miles you travel, the cheaper it becomes.' In no more than 50 words, comment on, this statement.