Question

In a move to provide additional sales for U.S. car manufacturers, the White House announced the purchase of 17,600 new fuel-efficient vehicles for the federal fleet. Suppose the new fleet, which includes 2,500 hybrid sedans, will cost $265 million. As an accountant in the White House Budget Office (WHBO), you have been asked to calculate the following:

(a) If each hybrid vehicle will have an average cost of $28,000, what will be the average cost per non-hybrid vehicle? Round to the nearest whole dollar.
a) $11,708
b) $12,294
c) $11,296
d) $12,000

Answer 1

To find the average cost per non-hybrid vehicle, subtract the cost of hybrid vehicles from the total cost of the fleet and then divide by the number of non-hybrid vehicles.

Step-by-step explanation:

To find the average cost per non-hybrid vehicle, we first need to calculate the total cost of the hybrid vehicles. We are given that there are 2,500 hybrid sedans and the average cost per hybrid vehicle is $28,000. So the total cost of the hybrid vehicles is 2,500 * $28,000 = $70,000,000.

Next, we need to find the cost of the non-hybrid vehicles. We are told that the total cost of the new fleet is $265 million, and we already know that the cost of the hybrid vehicles is $70,000,000. So the cost of the non-hybrid vehicles is $265,000,000 - $70,000,000 = $195,000,000.

Finally, we divide the cost of the non-hybrid vehicles by the number of non-hybrid vehicles, which is 17,600 - 2,500 = 15,100. So the average cost per non-hybrid vehicle is $195,000,000 / 15,100 = $11,920.