Business Math

Business Math

grade 11

Video

https://www.drive-safely.net/importance-regular-vehicle-maintenance/

Chapter 9.5: Operating and Maintaining a Vehicle

Pages 354-356

Objectives

• Solve the depreciation and cost per mile

• Illustrate the maximum annual variable cost

• Discuss the cost of operating a vehicle

Example 1

Chantal Jones purchased a new two-door coupe for $24,590 two years ago. She drove 14,322 miles last year and kept a record of all auto expenses. She estimates the vehicle’s present value at $19,219.Calculate her (a) depreciation, (b) total variable costs, (c) total fixed costs, and (d) cost per mile to operate her vehicle last year.

Step 1: Compute the annual depreciation

Annual Depreciation =

Purchase Price – Today’s Value

Number of Years Owned

= $24,590.00 – $19,219.00/2=

$5,371.00/2

= $2,685.50

Step 2: Total Variable Costs = $1,576.24 + 71.85 + 154.36 + 322.65 = $2,125.10

Step 3: Total Fixed Costs = $985 + 125.63 + 380.30 + 2,685.50 = $4,176.43

Step 4: Compute the Cost per Mile

Cost per Mile = Annual Variable Cost + Annual Fixed Cost/Number of Miles

= $2,125.10 + $4,176.43/14,322.00

= $6,301.53/14,322.00

= $0.43999

= $0.44

Open Ended

DeeDee Farrar purchased a new car 3 years ago for $33,500.00. Its

current value estimate is $19,900.00. Annual variable costs this

year were $995.60. The cost of insurance this year was $2,350.00,

registration was $132.50, and loan interest totaled $1,080.00. She

drove 13,540 miles this year. Compute the (a) depreciation, (b)

annual fixed costs, and (c) cost per mile.

Answer

a. $4,533.33 b. $8,095.83 c. $0.67 or 67¢

Multiple Choice

What is the difference between depreciation and appreciation?

• higher cost and lower cost

• increase in price and decrease in benefits

• Increase in value and decrease in value

Example 2:Tiffany East estimates that she will drive 15,000 miles during the year and will have $2,400.00 in annual fixed costs. If her goal is to have a cost per mile of $0.30 or less for her compact car, what is the maximum annual variable cost she can have?

Let x = Annual variable cost Cost per Mile = Annual Variable Cost + Annual Fixed Cost Number of Miles

$0.30 = x + $2,400 15,000

4,500 = x + $2,400

$2,100 = x

Tiffany must have annual variable costs of $2,100 or less.

Open Ended

Tiffany East estimates that she will drive 15,000 miles during the year

and will have $3,000.00 in annual fixed costs. If her goal is to have a

cost per mile of $0.30 or less for her compact car, what is the maximum

annual variable cost she can have?

Answer

Let x = Annual variable cost

Cost per Mile =

Annual Variable Cost + Annual Fixed Cost/Number of Miles

$0.30 = (x + $3,000) ÷18,500 ; $5,550 = x + $3,000;

$2,550 = x

Multiple Choice

What is annual variable cost?

• cost that decreases with increase in miles driven

• cost that increases with increase in miles driven

• cost that increases with decrease in miles driven

Open Ended

Last year Carlito Olmstead drove 142,400 miles in the delivery van that

he purchased 2 years ago for $22,565.00. It is now worth $10,320.00. His

variable costs this year were gasoline $28,365.21, oil and filters $598.10,

2 sets of tires $897.60, battery $85.95, and maintenance $1,256.54. His

insurance cost $2,884.26, registration was $159.65, and loan interest was $658.93. What was the cost per mile for him to operate his van?

Answer

a. $0.29

Multiple Choice

How can you find the operating cost?

• on cost of maintaning

• depends on the costs of vehicle usage

• on the expenses

• on depreciation

Open Ended

Give the main points of the lesson.