Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 47

Strategy; Variable and Fixed Costs

Zipcar (www.zipcar.com) is a car-sharing club founded in Cambridge, MA, in 1999. The club members pay an annual fee and then have the opportunity to rent a small car (usually a subcompact; the models include the Toyota Prius) for a fixed hourly rate. Zipcar is located largely in select metropolitan areas such as Boston, San Francisco, and Washington D.C. Members, called “Zipsters” make reservations for a car on the Zipcar Web site, and then use an access card to open the vehicle. The vehicle has a “home base” parking spot where the driver picks up and returns the vehicle. The club grew by 80 percent in 2007 and has great plans for the future, subject to potential competition from the existing car rental companies such as Hertz and Enterprise.

Required

1. What are the fixed and variable costs for Zipcar?

---

2. What are some of the competitive advantages and challenges of the Zipcar concept?

Step 1 of 3

Fixed costs are those costs which does not changes with change in level of production. Variable costs are those costs which changes with change in level of production. The sum of fixed and variable costs is total cost for the company.