We Deliver operates a fleet of delivery trucks in Halifax. Analysis shows that if a truck is driven 159,000 kilometres during a year, the average operating cost is 12.0 cents ($0.120) per kilometre. If a truck is driven only 85,000 kilometres during a year, the average operating cost increases to 13.9 cents ($0.139) per kilometre. Required: 1. Using the high–low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Do not round your intermediate calculations. Round the "Variable cost per kilometer" to 3 decimal places.) 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 139,400 kilometres during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations. Round the "Variable cost per kilometer" to 3 decimal places.)
We Deliver operates a fleet of delivery trucks in Halifax. Analysis shows that if a truck is driven 159,000 kilometres during a year, the average operating cost is 12.0 cents ($0.120) per kilometre. If a truck is driven only 85,000 kilometres during a year, the average operating cost increases to 13.9 cents ($0.139) per kilometre. Required: 1. Using the high–low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Do not round your intermediate calculations. Round the "Variable cost per kilometer" to 3 decimal places.) 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 139,400 kilometres during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations. Round the "Variable cost per kilometer" to 3 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
We Deliver operates a fleet of delivery trucks in Halifax. Analysis shows that if a truck is driven 159,000 kilometres during a year, the average operating cost is 12.0 cents ($0.120) per kilometre. If a truck is driven only 85,000 kilometres during a year, the average operating cost increases to 13.9 cents ($0.139) per kilometre.
Required:
1. Using the high–low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Do not round your intermediate calculations. Round the "Variable cost per kilometer" to 3 decimal places.)
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 139,400 kilometres during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations. Round the "Variable cost per kilometer" to 3 decimal places.)
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