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How many miles would you have to drive

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Question - 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 $6,000 above the cost of a traditional vehicle. The hybrid will get 30 miles per gallon of gas, and the traditional car will get 20 miles per gallon. Also, assume that the cost of gas is $2.40 per gallon.

Variable gasoline cost

Hybrid car is 0.08$

Traditional car is 0.12

The "contribution margin" of the hybrid vehicle relative to the traditional vehicle savings per mile is $0.04

How many miles would you have to drive in order to break even on your investment in the hybrid car?

Reference no: EM132556666

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