Harmon Auto Supply delivers parts to area auto service centres and is replacing its fleet of delivery vehicles. What is the cross over point in kilometers? Gasoline Vehicle
Vehicle Purchase Cost $25 000
Vehicle Operating Cost Per Kilometre $0.13
Useful Life of Vehicle 10 years
Kilometres Per Year 18 000
Kilometres Per Litre 25
Average Fuel Price Per Litre $2.65
Hybrid Vehicle
Vehicle Purchase Cost $29 000
Vehicle Operating Cost Per Kilometre $0.07
Useful Life of Vehicle 10 years
Kilometres Per Year 18 000
Kilometres Per Litre 40
Average Fuel Price Per Litre $2.65

Question

Quizplus · Accepted Answer

The crossover point is the point at which the total cost of owning and operating the two vehicles is the same. To calculate the crossover point, we need to find the total cost of owning and operating each vehicle over its useful life.The total cost of owning and operating the gasoline vehicle is:Purchase cost: $25,000Operating cost: $0.13 per kilometer * 18,000 kilometers per year * 10 years = $23,400Fuel cost: $2.65 per liter / 25 kilometers per liter * 18,000 kilometers per year * 10 years = $19,560Total cost: $25,000 + $23,400 + $19,560 = $67,960The total cost of owning and operating the hybrid vehicle is:Purchase cost: $29,000Operating cost: $0.07 per kilometer * 18,000 kilometers per year * 10 years = $12,600Fuel cost: $2.65 per liter / 40 kilometers per liter * 18,000 kilometers per year * 10 years = $13,260Total cost: $29,000 + $12,600 + $13,260 = $54,860The crossover point is the point at which the total cost of owning and operating the two vehicles is the same. This occurs at 100,629 kilometers.

Harmon Auto Supply Delivers Parts to Area Auto Service Centres