Question

Chico Kahlo purchased a car 1 year ago for $10,900.00. He drove it 13,890 miles and kept a record of his expenses. His variable costs were $1,908.00. His fixed costs for insurance and license were $800.00. He estimates the car’s present value at $8,652.00. What was Chico’s cost per mile for him to operate his car?

Answer 1

To find Chico's cost per mile to operate his car, we need to calculate his total cost and then divide it by the total number of miles he drove.

Total cost = Variable costs + Fixed costs - Present value
Total cost = $1,908.00 + $800.00 - $8,652.00
Total cost = $1,908.00 + $800.00 - $8,652.00
Total cost = $2,708.00 - $8,652.00
Total cost = -$5,944.00

Since the total cost is negative, it indicates that Chico has gained $5,944.00 in value from operating his car.

Now, we can find the cost per mile:
Cost per mile = Total cost / Miles driven
Cost per mile = -$5,944.00 / 13,890 miles
Cost per mile ≈ -$0.427 per mile