Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 7

You are considering lending a car to a friend so she can drive to Aspen. What costs would you ask her to reimburse? How would your answer change, if at all, if you decided to go along? Identify the possible options and explain your choices.

Step 1 of 2

The person, who takes the car from the lender, should reimburse the petrol/diesel costs to the lender in case the car is already filled with the petrol/oil. The person who takes the car should reimburse costs towards the petrol/diesel used by him during the drive. In case, the car is not filled with petrol/diesel at the time of lending the car, the costs of petrol would not be reimbursed to the lender since the person who takes the car from the lender would bear diesel costs for travelling.

In addition to the petrol/diesel cost, the car maintenance and service charges are to be reimbursed to the lender, in case the car servicing is done exclusively for the purpose of lending the car. In case, the car maintenance and service charges are paid by the person who takes the car, no servicing charges would be reimbursed to the lender