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Compute the average cost per kilometre of owning

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Reference no: EM132517623

Hart Company sells and delivers office furniture across Western Canada.

The costs associated with the acquisition and annual operation of a delivery truck are given below:

Insurance$1,739 Licences$215

Taxes (vehicle)$126

Garage rent for parking (per truck)$1,260

Depreciation ($26,500 ÷ 5 years)$5,300

Gasoline, oil, tires, and repairs$0.22/km

Required:

Question 1. Assume that Hart Company owns one truck that has been driven 24,000 kilometres during the first year. Compute the average cost per kilometre of owning and operating the truck. (Round your answer to 2 decimal places.)

Question 2. Assume that the company decides to use the truck during the second year. Near year-end, an order is received from a customer over 1,000 kilometres away. What costs from the previous list are relevant in a decision between using the truck to make the delivery and having the delivery done commercially? (Round your answer to 2 decimal places.)

Question 3. Occasionally, the company could use two trucks at the same time. For this reason, some thought is being given to purchasing a second truck. The total kilometres driven would be the same as if only one truck were owned. What costs from the previous list are relevant to a decision about whether to purchase the second truck?

Reference no: EM132517623

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