Used in making personal financial decisions

Assignment Help Financial Accounting

Reference no: EM13823995

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 $4,500 above the cost of a traditional vehicle. The hybrid will get 40 miles per gallon of gas, and the traditional car will get 30 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 of going one mile in the hybrid car? What is the variable cost of going one mile in the traditional car?

(b) Using the information in part (a), 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 basis.

(d) What other factors might you want to consider?

Reference no: EM13823995

Questions Cloud

Determine net cash flows from operating activities : During 2010, Diaz Corporation had net income of $41,000. Included on its income statement were depreciation expense of $2,300 and amortization expense of $300. During the year, Accounts Receivable increased by $3,400, Inventories decreased by $1,900,..

Regression analysis-what are the estimated total costs : The regression analysis for Cruz Catering gave the following results: Total costs = $3,000 + $1.90 meals + $15 jobs + $100 new products + $50 new customers. What are the estimated total costs in a month in which there are 3,000 meals prepared/sold, 2..

Quoted material must have accompanying citation : What is it that sets some large urban areas apart from others and makes them stand out as special tourist destinations? Your essay response must be a minimum of 500 words in length, not counting references listed at the end or repeating of the questi..

Operating agreement specified an income-sharing ratio : Ben Bowman and Savannah Mapes formed a limited liability company with an operating agreement that provided a salary allowance of $89,000 and $71,000 to each member, respectively. In addition, the operating agreement specified an income-sharing ratio ..

Used in making personal financial decisions : 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. What is the variable gasoline cost of going one mile in the hybrid car? What is ..

How does seasonality create marketing : 1. How does seasonality create marketing, management, and financial challenges for attraction and entertainment operators? Provide an example in which these challenges affected your travel.

Dividing partnership income : Determine their participation in the year's net income of $240,000 under each of the following independent assumptions: No agreement concerning division of net income. Divided in the ratio of original capital investment.

What process did you use in making your personal budget : In your everyday life, budgeting is a best practice in order to keep living expenses and savings within your financial means. In many instances, personal budgeting is as important as budgets prepared by companies. Why? Remember that companies exist b..

As a result of a thorough physical inventory : As a result of a thorough physical inventory, Hastings Company determined that it had inventory worth $270,000 at December 31, 2010. This count did not take into consideration the following facts: Determine the correct amount of inventory that Hastin..

User Account

All Pages