Question

Automobile Leasing A car-leasing agency purchases new cars each year for use in the. agency, The cars cost $15,000 new. They are used for 3 years, after which they are sold for $3,600. The owner of the agency estimates that the variable costs of operating the cars, exclusive of gasoline, are $0.16 per mile. Cars are leased at a flat rate of $0.33 per mile (gasoline not included). (a) What is the break-even mileage for the 3-year period? (b) What are total revenue, total cost, and total profit for the 3-year period if a car is leased for 50,000 miles? (c) What price per mile must be charged in order to break even if a car is leased for 50,000 miles over a period of 3 years? (d) What price per mile must be charged in order to earn a profit of $5,000 per car over its 3-year lifetime if it is leased for a total of 50,000 miles?

Answer 1

Answer:

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