Oven Pies Ltd plans to buy a delivery van to distribute pies from the bakery to various neighbourhood shops. It will use the van for three years. The expected costs are as follows:    

* Fuel consumption is 1 litre 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). Draw a graph showing variable cost, fixed cost and total cost.

(c). Calculate the average cost per mile at each of the mileages set out in (a).

(d). Write a short commentary on the behaviour of costs as annual mileage increases.

Transcribed Image Text:

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 licence and insurance, per year 800 Fuel, per litre* 0.70