Question

An electric power truck costs $23,000, and it is expected to service for 6 years. At the end of the life of the truck, we estimated with it will still worth $2,500 salvage value. If the operating cost is $3,200 per month with a 20% of the time is not in use. Calculate the variable cost on a monthly basis. What is the fixed cost for the truck per month? The internal rate of return is 6% per year.

Answer 1

Total Variable Cost formula

Total Varibale Cost = Quantity of output x Variable cost per unit of output

Total Cost of Production = 230400

Number of unit produced = 103.22

230400 x 103.22 = 23,781,888

Fixed Cost for the Truck per Month =

Average Fixed Cost Formula

= Average fixed cost formula = Total Fixed Cost/ Total number of Units made

= 23451584/103.22 = 227200

Internal rate of return formula= Cash flows /(Time period + Discount Rate)²

= 822067/6+12 = 153452.50

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