SECTION 9-5 pp. 327-329 Operating and Maintaining a Vehicle
Compute: total cost per mile of operating and maintaining a vehicle Section Objective
Key Words to Know variable costs (p. 327) Vehicle costs that increase the more you drive, such as gasoline and tires. fixed costs (p. 327) Costs that remain the same no matter how much you drive, such as vehicle insurance and registration fees.
Key Words to Know depreciation (p. 327) A decrease in the value of a vehicle because of its age and condition.
Formula Costs per Mile = Annual Variable Cost + Annual Fixed Cost Number of Miles Driven
A Hard One to Pick p. 327 What are some of the other costs Gomez needs to take into consideration before buying a vehicle?
Example 1 Ann Jones purchased a used vehicle for $4,000 one year ago. She drove 9,000 miles during the year and kept a record of all her expenses. She estimates the vehicle’s present value at $3,200. Her fixed and variable costs are shown in the figure below. What was the cost per mile for Jones to operate her vehicle last year?
Example 1 Answer Step: Find the cost per mile. (Annual Variable Cost + Annual Fixed Cost) ÷ Number of Miles Driven ($819.20 + $1,261.65) ÷ 9,000 = $2,080.85 ÷ $9,000= $0.231 or $0.23 per mile
Example 2 Lucas Perry purchased a new four-door car 2 years ago at a price of $21,750. Kiplinger estimates it is worth $13,920 today. The Complete Car Cost Guide computes the annual variable cost to be $1,330.20 per year with insurance costing $1,461 per year.
Example 2 (cont.) Perry paid $112.60 for license and registration fees and drove 16,500 miles during the year. After computing the depreciation and the total annual cost, find the cost per mile.
Example 2 Answer: Step 1 Find the depreciation. Purchase Price – Today’s Worth Number of Years Owned ($21,750.00 – $13,920.00) ÷ 2 $7,830.00 ÷ 2 = $3,915.00
Example 2 Answer: Step 2 Find the total annual cost. $1,330.20 + ($1,461.00 + $3,915.00 + $112.60) = $6,818.80
Example 2 Answer: Step 3 Find the cost per mile. (Annual Variable Cost + Annual Fixed Cost) ÷ Number of Miles Driven $6,818.80 ÷ 16,500 = $0.4132 or $0.41 per mile
Practice 1 Kim Leung drove his SUV 11,500 miles. Fixed costs totaled $3,343. Variable costs totaled $1,511. What was the total annual cost? What was the cost per mile?
Practice 1 Answer Total annual cost: $4,854 Cost per mile: $0.42 per mile
Practice 2 Kim Misawa drove her vehicle 13,000 miles. Fixed costs totaled $2,693. Variable costs totaled $1,471. What was the total annual cost? What was the cost per mile?
Practice 2 Answer Total annual cost: $4,164 Cost per mile: $0.32 per mile
END OF SECTION 9-5 Operating and Maintaining a Vehicle