1. Operating and Maintaining a Vehicle pp. 327-329 9-5 SECTION

2. Click to edit Master text styles Second level Third level Fourth level Fifth level 2 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 2 of 19 9-5 variable costs (p. 327) Vehicle costs that increase the more you drive, such as gasoline and tires. fixed costs (p. 327) Costs that remain the same no matter how much you drive, such as vehicle insurance and registration fees. Key Words to Know

3. Click to edit Master text styles Second level Third level Fourth level Fifth level 3 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 3 of 19 9-5 depreciation (p. 327) A decrease in the value of a vehicle because of its age and condition. Key Words to Know

4. Click to edit Master text styles Second level Third level Fourth level Fifth level 4 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 4 of 19 9-5 Costs per Mile = Annual Variable Cost + Annual Fixed Cost Number of Miles Driven Formula

5. Click to edit Master text styles Second level Third level Fourth level Fifth level 5 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 5 of 19 9-5 Ann Jones purchased a used vehicle for $4,000 one year ago. She drove 9,000 miles during the year and kept a record of all her expenses. She estimates the vehicle’s present value at $3,200. Her fixed and variable costs are shown in the figure below. What was the cost per mile for Jones to operate her vehicle last year? Example 1

6. Click to edit Master text styles Second level Third level Fourth level Fifth level 6 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 6 of 19 9-5 Example 1 (cont.)

7. Click to edit Master text styles Second level Third level Fourth level Fifth level 7 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 7 of 19 9-5 Step: Find the cost per mile. (Annual Variable Cost + Annual Fixed Cost) ÷ Number of Miles Driven ($573.20 + $1,261.65) ÷ 9,000 = $1,834.35 ÷ $9,000 = $0.20387 or $0.20 per mile Example 1 Answer

8. Click to edit Master text styles Second level Third level Fourth level Fifth level 8 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 8 of 19 9-5 Lucas Perry purchased a new four-door car 2 years ago at a price of $21,750. Kiplinger estimates it is worth $13,920 today. The Complete Car Cost Guide computes the annual variable cost to be $595.20 per year with insurance costing $1,461 per year. Example 2

9. Click to edit Master text styles Second level Third level Fourth level Fifth level 9 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 9 of 19 9-5 Perry paid $112.60 for license and registration fees and drove 16,500 miles during the year. After computing the depreciation and the total annual cost, find the cost per mile. Example 2 (cont.)

10. Click to edit Master text styles Second level Third level Fourth level Fifth level 10 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 10 of 19 9-5 Find the depreciation. Purchase Price – Today’s Worth Number of Years Owned ($21,750.00 – $13,920.00) ÷ 2 2 $7,830.00 ÷ 2 = $3,915.00 Example 2 Answer: Step 1

11. Click to edit Master text styles Second level Third level Fourth level Fifth level 11 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 11 of 19 9-5 Find the total annual cost. $595.20 + ($1,461.00 + $3,915.00 + $112.60) = $6,083.80 Example 2 Answer: Step 2

12. Click to edit Master text styles Second level Third level Fourth level Fifth level 12 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 9-5, Slide 12 of 19 9-5 Find the cost per mile. (Annual Variable Cost + Annual Fixed Cost) ÷ Number of Miles Driven $6,083.80 ÷ 16,500 = $0.3687 or $0.37 per mile Example 2 Answer: Step 3

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