Chapter 6, Problem 23E

The behavior of the annual maintenance and repair cost in the Bus Transportation Department of the Summerset Public School District is shown by the solid line in the following graph. The dashed line depicts a semi variable-cost approximation of the department’s repair and maintenance cost.

Required:

1. 1. What is the actual (curvilinear) and estimated (semivariable) cost shown by the graph for each of the following activity levels?

1. 2. How good an approximation does the semi variable-cost pattern provide if the department’s relevant range is 40.000 to 60.000 miles per month? What if the relevant range is 20.000 to 90.000 miles per month?