IDENTIFY Zipcar fixed costs and variable costs? Based on the data presented inexhibit 8b of the case, EXPLAIN why variable costs are turning out to be higher thanthe ones estimated in the data in exhibit 5

Exhibit 5 Revised Financial Plan for Boston, May 2000 Assumption [per unity YEAR 1 YEAR 2 YEAR 3 YEAR4 YEARS Trips/membermonth mics inp hours/trip Beginning Members 440 856 908 1180 Attrition 0.15 128.4 136.2 177 Ending Members 440 856 1180 1196 New Members 440 482 80.4 408.2 192 Aug # of Members 648 1.044 1,188 Application fee (per new member) 25 11,000 12 050 4 510 10.20 4, 825 Annual fees (par avg member) 75 16,500 48,600 78, 300 89, 100 Per mile charge 0.4 92,928 273,715 372 657 440,986 501,811 Per hour change 6.6 232,320 684 288 931 392 1,102,464 1,254,528 Security Deposits (aug. balance] 200 194,400 264,600 313,200 356,400 Interest income (on avg. sen. dep. balance 2,640 7,776 10 584 12,528 14,256 Total Revenue 355,388 1,026,429 1 285 193 1,644,483 1,854,520 Costs Variable Costs / Gar Beginning Cars 24 50 Ending Cars 24 48 50 66 Aug # of Cars Lease Cost (cardyear) 1,400 52,800 158, 400 215 600 256,200 290,400 Access equip. (canyear) 6,000 18,000 24.500 20,000 23,000 Fuel [car/year) 1 080 12,960 28,880 52 920 62,640 71,280 Insurance (canyear) 1700 20,400 61,200 83,300 98,600 1 12,200 Maintenance (carlyear ) 400 4,800 14,400 19 600 23.200 26,400 Parking (carlyear) 7,200 21,600 29 400 34.800 39,600 Total Variable Costs 104, 160 312,480 425,320 503,440 572,880 Fived costs . Corp. level Corporate Insurance 800 Reservation system 2,895 3,160 12 000 7 000 Administration - Corp. 100,000 100,000 100,000 100,000 100,000 Benefits 20,000 20,000 20,000 20,000 20,000] Office Space 5,000 6,000 Willlice equip. & supplies 1000 1,000 1,000 1,00O 1,000 Phone 1.200 1,800 1.800 1.800 2,500 Total Corp. Overhead 125,895 126,760 140.600 134,600 136,300 Fixed costs . Boston Office Billing (memberyear 24 5,280 15,552 21,168 28,512 Administration - local 24,000 24,000 24,000 24,000 24,000 Benefits 4.800 24,780 24 780 24. 780 24, 780 Office space 5.000 6.000 Office equip. & supply 1000 1000 1000 1000 1000 Telephone and Datalines 1.200 1.800 1 800 1,800 2 500 Marketing 10,000 12,000 12 000 12.000 12,00 Background checks (per new member 8.800 9.640 3.608 8, 164 3.860 Total Boston Overhead 55,080 88,772 93,356 101,800 101,652 Total Overhead Costs 180 975 215.532 233 956 236,400 237,962 Net Income Before Tax 70 253 498,417 725 917 904 643 1,053 688l[Chase was also beginning to get a handle on operating and overhead costs. She explained: At the variable cost level, lease costs were actually coming in a bit higher than anticipated $4,000 per vehicle per year. As we got bigger, the car companies thought we were a bigger risk. They look at one person leasing one car, and theyr can manage that risk pretty well. But, when we started leasing 10 or a dozen cars, all of a sudden we are a big credit risk, and they needed to price the lease at a premium. Parking was coming in more expensive alsoabout $550 per car per year. And, our fuel bills are running about 10% higher than expected. The odier expenses are coming in about where expected, on a percar basis. Overhead is more difficult to think about. We invested about $200,000 in what I would call pure start upcoststhe technology, legally incorporating, naming the business. And, I would estimate that our overhead is now running about $44,000 per month. As I analyze mat figure, I am allocating $30,000 per month of that gure to corporate overhead, meaning activities that we would be funding whether we were in one or many cities: legal, Web site design, overall design, and development of technology and marketing materials. And, $14,000 per moni is the Bostonspecific overhead. On the marketing side, we have succeeded in keeping pretty close to budget, spending between 51,000 and $1,500 per moni, or about $?,300 so far. People have been amazed that we have kept marketing this low. The keyr has been incredible, free publicity; advertising generated by the cars; brochures, which we put wherever we park a car; and just great word of mouth. Basically, we had no money, so this forced us to be incredibly disciplined. I knew we had to prove the business model, and showing we could acquire customers at a reasonable cost was a very important part of that. Meanwhile, the Springboard 2000 New England venture forum was approaching quickly. By the end of October, IChase needed to have developed as effective a presentation to the Springboard conference as possible. Overhead Expenses Boston 14,000.00 Corporate 30,000.00 Applications & Membership Beginning members 141.00 Applications 112.00 Applications Approved 105.00 New members 101.00 Attrition 3.00 Ending Members 239.00 Total "member days"" 5,086.00 Application Fees 2 800.00 Annual Member Fees recelved 7.575.00 Annual Member Fees "booked"" 1,512.00 Depools received In September 42,300.00 Total deposit balance month end 71,700.00 Average depoolt balance 42,090.00 Interest earned on total deposits 155.00 Usage Avallable "car days" 439.00 Total trips taken (Uses] 335.00 hourly uses 218.00 dally uses 117.00 Total miles driven 16 339.00 miles driven - hourly uses 5,341.00 miles driven - dally uses 10,998.00 Total hours used 3.223.00 hours used - hourly uses 1,351.00 hours used - dally uses 1,872.00 Trips - night & wekend %%" 60.008% Hours of use - night and weekend %" 53.00% Revenues Total miles billed 5,765.00 miles billed - hourly uses 5,341.00 miles billed - dally uses 424.00 Total hours billed 2.267.00 hours billed - hourly uses 1,351.00 hours billed - dally uses 936.00 Total mileage revenue 2.276.00 mileage revenue - hourly uses 2,105.40 mileage revenue - dally uses 169.60 Total hourly revenue 12,368.50 hourly revenue - hourly uses 7,220.50 hourly revenue - daly uses 5,148.00 Total usage revenue 14 644.50 revenue from dally uses 5,317.60 revenue from hourly uses 9,326.90