Calculating Average Cost per Mile as a
Function of Mileage
Table 8.2 itemizes the operating and ownership costs associated with driving a passenger car by fixed, variable, and mixed classes. Note that the only change from the preceding list is in the depreciation amount. Using the given data, develop a cost–volume chart and calculate the average cost per mile as a function of the annual mileage.
TABLE 8.2 Cost Classification of Owning and Operating a Passenger Car
Variable costs: Standard miles per gallon20 miles/gallon Average fuel price per gallon$1.939/gallon Fuel and oil per mile $0.085Maintenance per mile $0.058Tires per mile $0.007
Annual fixed costs: Insurance (comprehensive) $1,195License, registration, taxes $390Finance charge $740
Mixed costs:Depreciation Fixed portion per year (15,000 miles) $4,005Variable portion per mile (above 15,000 miles) $0.185