Question 8.4: Use the data in Numerical Example 8.3, except assume that t...
Use the data in Numerical Example 8.3, except assume that the motor pool expects company vehicles to be driven a total of 1 million kilometers. What is the application rate used by the motor pool?
The application rate is total expected costs in the motor pool divided by the total expected kilometers driven:
$200,000+($0.20/kilometers × 1,000,000 kilometers)/1,000,000 kilometers =$0.40/kilometer
This rate is less than the application rate when it is assumed that 800,000 kilometers will be driven.
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