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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 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the average operating cost increases to 13.6 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 100,000 miles during a year, what total cost would you expect to be incurred?

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 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the average operating cost increases to 13.6 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 100,000 miles during a year, what total cost would you expect to be incurred?

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 11EB: Able Transport operates a tour bus that they lease with terms that involve a fixed fee each month...
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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 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the average operating cost increases to 13.6 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 100,000 miles during a year, what total cost would you expect to be incurred?
Transcribed Image Text: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 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the average operating cost increases to 13.6 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 100,000 miles during a year, what total cost would you expect to be incurred?
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