Question

CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT. Expand Your Critical Thinking 11-7 (Part Level Submission) Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options. Suppose that you are considering the purchase of a hybrid vehide. Let's assume the following facts. The hybrid will initially cost an additional $6,500 above the cost of a traditional vehicle. The hybrid will get 30 miles per gallon of gas, and the traditional car will get 18 miles per gallon. Also, assume that the cost of gas is $1.80 per gallon Using the facts above, answer the following questions. (a) What is the variable gasoline cost of going one mile in the hybrid car? What is the variable cost of going one mile in the traditional car? (Round answers to 2 decimal places, e.o. 0.25.) Hybrid car Traditional car Variable gasoline cost

Answer 1

Variable gasoline cost of going one mile in traditional car = $1.8/18 = $ 0.10

Variable gasoline cost of going one mile in hybrid car = $1.8/30 = $ 0.06

So there will be saving of $ 0.04 per mile in hybrid car but increase in fixed cost of $ 6,500 so reach break evem we will have to go for minimum of 162,500 miles(6500/0.04).