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1 July, 00:56

Paul Kim estimates that he will drive about 10,000 miles during the year and will have $3,460 in annual fixed costs. He projects a cost per mile of $0.54 or less for his truck. What is the maximum annual variable cost he can have to reach his projection?

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  1. 1 July, 01:24
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    The maximum annual variable cost he can have to reach his projection is $1,940

    Step-by-step explanation:

    Given;

    Number of miles drive per year N = 10,000 miles

    Total annual Fixed cost F = $3,460

    cost per mile (rate) r = $0.54 or less

    Total cost = fixed cost + variable cost

    Total cost = cost per mile * number of miles

    Total cost = r * N = $0.54 * 10,000 = $5,400

    Let V represent the total variable cost per year;

    F + V ≤ r * N

    Substituting the values;

    3,460 + V ≤ 5,400

    V ≤ 5,400 - 3,460

    V ≤ 1,940

    The maximum annual variable cost he can have to reach his projection is $1,940
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