Cost-volume-profit analysis can also be used in making personal financial decisions. For example, the purchase of a new car is one of your biggest personal expenditures. It is important that you carefully analyze your options. Suppose that you are considering the purchase of a hybrid vehicle. Let’s assume the following facts. The hybrid will initially cost an additional $5,000 above the cost of a traditional vehicle. The hybrid will get 30 miles per gallon of gas, and the traditional car will get 24 miles per gallon. Also, assume that the cost of gas is $2.40 per gallon.

What is the variable gasoline cost of going one mile in the hybrid car? What is the variable cost of going one mile in the traditional car?