Fixed Cost Calculation:

In our project, fixed cost consist of three factors.

1) Insurance - $1,000 per year per car

2) Car maintanence - $120 per year. ($30 per every 3 months to account for oil changes, lube jobs etc.)

3) Gas expense -  We assumed that each driver can make 10 delivery trips a day.  Since each driver has to deliver pizzas to the customers within reasonable amount of time.  In our case, we assumed that thirty minutes is a reasonable amount of time.  Given
 the thirty minutes time limit, we measured that each driver can drive approximately 4 KM per trip including all the stopping time in between deliveries. Hence, each day a driver drives approximately 40 KM (10 trips * 4 KM). In an average 4 cylinder car, 
it cost about $25 per 400 KM (based on consumer reports with a full tank of gas) for gas expense.  This means that per day, a driver will use $2.50 in gas per day.  Over a year, a driver spend a gas expense of $912.50 ($2.50*365) a year.


Therefore, total fixed cost is $ 2032.50 ($ 1,000 + $ 120 + $ 912.50) a year.  To calculate how much each delivery trip contributes to the fixed cost, we divide the total fixed cost for the year by the number of trips a driver will make in a year.  This n
umber is thus 2032.50/3650= 0.557 or 55.7 cents.