Oven Pies Ltd plans to buy a delivery van to distribute pies from the bakery to various neighborhood shops. It will use the van for three years. The expected costs are as follows:
________________________________________________ £
New van ...................................................... 15,000
Trade-in price after 3 years ..................................... 600
Service costs (every 6 months) ................................ 450
Spare parts, per 10,000 miles .................................. 360
Four new tyres, every 15,000 miles ......................... 1,200
Vehicle license and insurance, per year ...................... 800
Fuel, per liter* ................................................... 0.70
* Fuel consumption is 1 liter every five miles.
(a) Prepare a table of costs for mileages of 5,000, 10,000, 15,000, 20,000 and 30,000 miles per annum, distinguishing variable costs from fixed costs.
(b) Calculate the average cost per mile at each of the mileages set out in (a).