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18 June, 09:21

A motor vehicle has annual depreciation of $2,000; oil changes cost $120, automobile insurance $500 annually, and license plates costs $100. What is the annual amount of the total fixed operating cost for this vehicle?

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  1. 18 June, 12:50
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    The total fixed operating cost is $2,600

    Explanation:

    The total fixed operating cost for the vehicle is computed as:

    Total fixed operating cost = Depreciation charges + Automobile insurance + License plates costs

    where

    Depreciation charges is $2,000

    Automobile insurance is $500

    License plates costs is $100

    Putting the values in the formula:

    = $2,000 + $500 + $100

    = $2,600

    Note: Oil changes cost is not fixed so will not be included in the the total fixed operating cost.
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