An employee of Deepee Hotels Ltd. has started using his personal automobile for company's business purposes...

 

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An employee of Deepee Hotels Ltd. has started using his personal automobile for company's business purposes with effect from 1st January, 2011. He would be reimbursed by the company at the rate of 12 paise per kilometre determined on the basis of the operating costs for 2010 which were as follows : Operating cost : Depreciation – straight-line Licence fee Rs. 600 20 160 Insurance Gas, oil, repairs and other variable costs 420 Total 1,200 Kilometres driven 10,000 Cost per kilometre During the year 2011, the car is estimated to be used by the employee as under : 12 paise Personal use 12,000 km. 8,000 Business use 20,000 km. You are required to : (a) Calculate the estimated annual operating cost for 2011 and the estimated cost per kilometre to be driven in 2011; (b) Calculate the amount the employee would be required to pay for every kilometre driven on account of personal use in 2011 ; and (c) Indicate whether it would be less expensive for the company to furnish an automobile to the employee. An employee of Deepee Hotels Ltd. has started using his personal automobile for company's business purposes with effect from 1st January, 2011. He would be reimbursed by the company at the rate of 12 paise per kilometre determined on the basis of the operating costs for 2010 which were as follows : Operating cost : Depreciation – straight-line Licence fee Rs. 600 20 160 Insurance Gas, oil, repairs and other variable costs 420 Total 1,200 Kilometres driven 10,000 Cost per kilometre During the year 2011, the car is estimated to be used by the employee as under : 12 paise Personal use 12,000 km. 8,000 Business use 20,000 km. You are required to : (a) Calculate the estimated annual operating cost for 2011 and the estimated cost per kilometre to be driven in 2011; (b) Calculate the amount the employee would be required to pay for every kilometre driven on account of personal use in 2011 ; and (c) Indicate whether it would be less expensive for the company to furnish an automobile to the employee.

Answer rating: 100% (QA)

Solution a Estimated Annual Operating Cost Rs Depreciation 600 ... View the full answer