Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 14

Estimating costs based on behavior patterns Terry estimates that the costs of insurance, license, and depreciation to operate his car total $430 per month and that the gas, oil, and maintenance costs are 80 cents per mile. Terry also estimates that, on average, he drives his car 2,000 miles per month.

Required:

a.How much cost would Terry expect to incur during July if he drove the car 2,342 miles?

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b. Would it be meaningful for Terry to calculate an estimated average cost per mile for a typical 2,000 mile month? Explain your answer.

Step 1 of 2

a)

The cost Terry would expect to incur during July if he drove the car 2,342 miles is calculated below:

The total cost for month of July shall be $2,303.60