A practising Chartered Accountant now spends Re 0.90 per kilometre on taxi fares for his clients, 5 works. He is considering two other alternatives, the purposes of a new small can or an old bigger car. The estimated cost figures are:
|
Items |
New small car |
Old bigger car |
|
Purchase price |
40,000 |
25,000 |
|
Sale price of the car after five years |
20,000 |
15,000 |
|
Repairs and servicing, per annum |
1,000 |
1,200 |
|
Taxes and insurance per annum |
1,700 |
700 |
|
Petrol price, per litre |
3.50 |
3.50 |
|
Petrol consumption per litre |
10 km |
7 km |
He estimates that he does 10,000 km annually, which of the three alternatives will be cheaper? If his practice expends and he has to do 19,000 km per annum, what should be his decision? At how many km per annum, will the cost of the two cars break even and why? Ignore interest and income tax.