Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore (A+ Guaranteed)

Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 135,000 kilometers during a year, the average operating cost is 14.5 cents per kilometer. If a truck is driven only 90,000 kilometers during a year, the average operating cost increases to 18.1 cents per kilometer.
1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places and Fixed cost answer to nearest whole dollar amount.)

High Level of Activity ___

Low Level of Activity ___

Change ___

Varaible cost pe kilometer ___

Fixed cost per year___

 

2.  Express the variable and fixed costs in the form Y = a + bX. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places.)

3.  If a truck were driven 112,000 kilometers during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations.)

Here’s the SOLUTION

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