QUESTION: SPEEDY PARCEL SERVICE OPERATES A FLEET OF DELIVERY TRUCKS IN A LARGE METROPOLITAN AREA. A CAREFUL STUDY BY THE COMPANY'S COST ANALYST HAS DETERMINED THAT IF A TRUCK IS DRIVEN 96,000 MILES DURING A YEAR, THE AVERAGE OPERATING COST IS 10.3 CENTS PER MILE. IF A TRUCK IS DRIVEN ONLY 64,000 MILES DURING A YEAR, THE AVERAGE OPERATING COST INCREASES TO 11.5 CENTS PER MILE. REQUIRED: 1. USING THE HIGH-LOW METHOD, ESTIMATE THE VARIABLE AND FIXED COST ELEMENTS OF THE ANNUAL COST OF TRUCK OPERATION. 2. EXPRESS THE VARIABLE AND FIXED COSTS IN THE FORM Y= A + BX. 3. IF A TRUCK WERE DRIVEN 80,000 MILES DURING A YEAR, WHAT TOTAL COST WOULD YOU EXPECT TO BE INCURRED?
QUESTION: SPEEDY PARCEL SERVICE OPERATES A FLEET OF DELIVERY TRUCKS IN A LARGE METROPOLITAN AREA. A CAREFUL STUDY BY THE COMPANY'S COST ANALYST HAS DETERMINED THAT IF A TRUCK IS DRIVEN 96,000 MILES DURING A YEAR, THE AVERAGE OPERATING COST IS 10.3 CENTS PER MILE. IF A TRUCK IS DRIVEN ONLY 64,000 MILES DURING A YEAR, THE AVERAGE OPERATING COST INCREASES TO 11.5 CENTS PER MILE. REQUIRED: 1. USING THE HIGH-LOW METHOD, ESTIMATE THE VARIABLE AND FIXED COST ELEMENTS OF THE ANNUAL COST OF TRUCK OPERATION. 2. EXPRESS THE VARIABLE AND FIXED COSTS IN THE FORM Y= A + BX. 3. IF A TRUCK WERE DRIVEN 80,000 MILES DURING A YEAR, WHAT TOTAL COST WOULD YOU EXPECT TO BE INCURRED?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:QUESTION:
SPEEDY PARCEL SERVICE OPERATES A FLEET OF DELIVERY TRUCKS IN A LARGE
METROPOLITAN AREA. A CAREFUL STUDY BY THE COMPANY'S COST ANALYST
HAS DETERMINED THAT IF A TRUCK IS DRIVEN 96,000 MILES DURING A YEAR,
THE AVERAGE OPERATING COST IS 10.3 CENTS PER MILE. IF A TRUCK IS DRIVEN
ONLY 64,000 MILES DURING A YEAR, THE AVERAGE OPERATING COST
INCREASES TO 11.5 CENTS PER MILE.
REQUIRED:
1. USING THE HIGH-LOW METHOD, ESTIMATE THE VARIABLE AND FIXED COST
ELEMENTS OF THE ANNUAL COST OF TRUCK OPERATION.
2. EXPRESS THE VARIABLE AND FIXED COSTS IN THE FORM Y= A + BX.
3. IF A TRUCK WERE DRIVEN 80,000 MILES DURING A YEAR, WHAT TOTAL
COST WOULD YOU EXPECT TO BE INCURRED?
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