Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one ofyour biggest personal expenditures. It is important that you carefully analyze your options.Suppose that you are considering the purchase of a hybrid vehicle. Let's assume the following facts. The hybrid will initially cost anadditional $7,000 above the cost of a traditional vehicle. On average, the hybrid will get 60 miles per gallon of gas, and the traditionalcar will get 30 miles per gallon. Also, assume that the cost of gas is $2.40 per gallon.Using the facts above, answer the following questions.(a)For gasoline, what is the unit variable cost of going one mile in the hybrid car? What is the unit variable cost of going one mile inthe traditional car? (Round answers to 2 decimal places, e.g. 0.25.)Hybrid carTraditional carVariable gasoline cost$$Save for LaterAttempts: 0 of 1 usedSubmit Answer

Variable cost is the cost that changes with change in the activity of cost driver used. The variable…

Answered: Cost-volume-profit analysis can also be…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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View Policies Current Attempt in Progress 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 vehicle. Let's assume the following facts. The hybrid will initially cost an additional $5,500 above the cost of a traditional vehicle. On average, the hybrid will get 45 miles per gallon of gas, and the traditional car will get 27 miles per gallon. Also, assume that the cost of gas is $2.70 per gallon. Using the facts above, answer the following questions. (a) For gasoline, what is the unit variable cost of going one mile in the hybrid car? What is the unit variable cost of going one mile in the traditional car? (Round answers to 2 decimal places, e.g. 0.25.) Variable gasoline cost $ eTextbook and Media Save for Later Hybrid car Traditional car Attempts: 0 of 1…
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 vehicle. Let’s assume the following facts. The hybrid will initially cost an additional $3,780 above the cost of a traditional vehicle. The hybrid will get 50 miles per gallon of gas, and the traditional car will get 40 miles per gallon. Also, assume that the cost of gas is $3.60 per gallon.Using the facts above, answer the following questions. a) What is the variable gasoline cost going one mile in a hybrid car? What is the variable gasoline cost going one mile in a traditional car? b) Using the information in above part, if “miles” is your unit of measure, what is the “contribution margin” of the hybrid vehicle relative to the traditional vehicle? That is, express the variable cost savings on a per-mile…
using excelAssume you've graduated and get the dream job and need transportation to go to work (problem definition)-so you need to purchase a car (objective).You would like to analyze your financial options to purchase the car you want andat the same time spent the minimum possible (decision making criteria).You prefer to pay around 3000$/year (requirements)but if it helps to reduce the cost you can pay more.Explore the options of (compare alternatives to save $) 1- Getting a loan of 20K over 5 years at 5%, how much is your yearly payments. Hint: (=PMT(i,n,p) ) 2- Searching for a better loan at 4%- how much you save? (compare total interest paid I1-I2)3- Try to pay up your loan quicker like 3 years- See how much you save in Interest paid. (compare total interest paid ) 4 - Negotiated the purchase down to 18.5K and see how much you save in interest. (compare total interest paid as well as the total paid) 5- Put down more money at the…
You have just graduated from college and are looking to buy your first car. Money is tight right now, so you are concerned with initial cost as well as ongoing expenses. At the same time, you don't want to drive a slow, outdated car like your parents do. You have narrowed your choices down to two vehicles: a Honda Enigma and a Bizzarrini Booster. Based on the numbers below, calculate the value index for each car. Which car provides you with the greatest value? Click the icon to view the data table. The value index for Honda Enigma is. (Enter your response as a whole number) The value index for Bizzarrini Booster is (Enter your response as a whole number) provides the greatest total value index A The More Info The Dimension Fuel economy Reliability Speed and handling Aesthetics After-sales support Purchase price Honda Enigma Print Bizzarrini Booster Importance to you 3 54424 Honda Enigma value index for each car. Which car provides you with the greatest value? Click the icon to view the…
6. (Note, for this question, you may find information from the live session in Module 4 useful.) You are making a decision about purchasing a new car. You can choose between an electric vehicle that requires very high upfront costs, a somewhat cheaper hybrid vehicle and a traditional gasoline powered vehicle. Your discount rate for future cash flows is 10%. The upfront cost of each car is: Electric: $80,000 Hybrid: $60,000 Gas: $45,000 In the first year you estimate the running costs (including fuel, insurance, maintenance etc.) to be: Electric: $2,000 Hybrid: $5,000 Gas: $7,500 You assume that these costs will increase at an inflation rate of 5%. That is, year 2 costs will be 5% higher than year 1 costs and year 3 costs will be 5% higher than year 2 costs. a) You plan to keep the car for 10 years. For each car, calculate the present value of your costs. Which one ends costing less in present value terms? (1 pt) b) If instead you wanted to replace the car after 5 years, what would now…
Consider the following situation, which involves two options. Determine which option is less expensive. Are there unstated factors that might affect your decision? You currently drive 275 miles per week in a car that gets 16 miles per gallon of gas. You are considering buying a new fuel-efficient car for $15,000 (after trade-in on your current car) that gets 54 miles per gallon. Insurance premiums for the new and old car are $1000 and $700 per year, respectively. You anticipate spending $1400 per year on repairs for the old car and having no repairs on the new car. Assume gas costs $4.00 per gallon. Over a five-year period, is it less expensive to keep your old car or buy the new car? Question content area bottom Part 1 Over a five-year period, the cost of the old car is $enter your response here and the cost of the new car is $enter your response here . Thus, over a five-year period, it is less expensive to ▼ buy the new car. keep your old…
Your business is considering the selection of hybrid trucks as an alternative to conventional gasoline powered trucks. Based on the following data, should the hybrid trucks be selected over conventional? Use incremental rate of return analysis.
4. What is a Break-even Point and why do managers calculate it? 5. Branton Electric is considering the purchase of an entire cargo container filled with upgraded utility meters for $20,000. Branton can charge $50 for the installation of each upgraded meter, while the actual cost of the installation would be only $15. How many utility meter upgrades are necessary for Branton Electric to break even on this purchase? (Quick Start #16) 6. What are the advantages and disadvantages of using a conservative strategy of Capacity versus an Aggressive strategy?
Suppose you drive an average of 18,000 miles per year, and you need a new vehicle. You are looking at two possible vehicles. One is a compact car that averages 40 MPG in city and highway driving. The other is an SUV that averages 13 MPG city and highway. The compact car uses regular fuel, which averages about $3.99 per gallon. The SUV uses premium fuel, which averages $4.19 per gallon. How many fewer gallons of gas will you use annually if you purchase the compact car?
Suppose that your car should be sold now for $5000. Is this a sunk cost? Give the explanation.
A company is trying to decide whether to buy a new delivery truck to replace their old one. The old truck originally cost $32,000. The new truck will cost $45,000. If they buy the new truck, they will sell the old truck to a used truck dealer for $4,000. Based on the information given, what is the immediate total incremental cost or benefit of buying the new truck? (Indicate a net benefit as a positive number and a net cost as a negative number.)
You own a furniture manufacturing company. You are looking to expand into glass furniture and need to buy new manufacturing equipment to manufacture this type of furniture. You have researched many suppliers but have found that two machines will best suit your needs. The cost of machine 1 is $90,000, and the cost of machine 2 is $110,000. The estimated net profits the machines will generate are in the attached image. a)Compare the ARR for both machines and decide which machine you should buy. b)Critically evaluate the ARR technique in evaluating investment options.

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