Spirit Freightways is a leader in transporting agricultural products in the western provinces of Canada. Reese Brown, a financial analyst at Spirit Freightways, is studying the behav- ior of transportation costs for budgeting purposes. Transportation costs at Spirit are of two types: (a) operating costs (such as labor and fuel) and (b) maintenance costs (primarily overhaul of vehicles). Brown gathers monthly data on each type of cost, as well as the total freight miles traveled by Spirit vehicles in each month. The data collected are shown below (all in thousands): ITI Month Operating Costs $ 942 Maintenance Costs Freight Miles $ 974 January February March 1,710 1,008 776 2,655 1,218 686 2,705 April May 1,380 694 4,220 1,484 588 4,660 June 1,548 422 4,455 1,568 352 July August September 4,435 1,972 420 4,990 1,190 564 2,990 October 788 1,302 962 2,610 November 762 2,240 December 772 1,028 1,490

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Brown expects Spirit to generate, on average, 3,600 freight miles each month next year. How much in operating costs should Brown budget for next year?

Spirit Freightways is a leader in transporting agricultural products in
the western provinces of Canada. Reese Brown, a financial analyst at Spirit Freightways, is studying the behav-
ior of transportation costs for budgeting purposes. Transportation costs at Spirit are of two types: (a) operating
costs (such as labor and fuel) and (b) maintenance costs (primarily overhaul of vehicles).
Brown gathers monthly data on each type of cost, as well as the total freight miles traveled by Spirit
vehicles in each month. The data collected are shown below (all in thousands):
ITI
Month
Operating Costs
$ 942
Maintenance Costs
Freight Miles
$ 974
January
February
March
1,710
1,008
776
2,655
1,218
686
2,705
April
May
1,380
694
4,220
1,484
588
4,660
June
1,548
422
4,455
1,568
352
July
August
September
4,435
1,972
420
4,990
1,190
564
2,990
October
788
1,302
962
2,610
November
762
2,240
December
772
1,028
1,490
Transcribed Image Text:Spirit Freightways is a leader in transporting agricultural products in the western provinces of Canada. Reese Brown, a financial analyst at Spirit Freightways, is studying the behav- ior of transportation costs for budgeting purposes. Transportation costs at Spirit are of two types: (a) operating costs (such as labor and fuel) and (b) maintenance costs (primarily overhaul of vehicles). Brown gathers monthly data on each type of cost, as well as the total freight miles traveled by Spirit vehicles in each month. The data collected are shown below (all in thousands): ITI Month Operating Costs $ 942 Maintenance Costs Freight Miles $ 974 January February March 1,710 1,008 776 2,655 1,218 686 2,705 April May 1,380 694 4,220 1,484 588 4,660 June 1,548 422 4,455 1,568 352 July August September 4,435 1,972 420 4,990 1,190 564 2,990 October 788 1,302 962 2,610 November 762 2,240 December 772 1,028 1,490
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