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?

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