Chapter 6, Problem 30E

Rio Bus Tours has incurred the following bus maintenance costs during the recent tourist season. (The real is Brazil’s national monetary unit. On the day this exercise was written, the real was equivalent in value to .269 U.S. dollar.)

Required:

1. 1. Use the high-low method to estimate the variable cost per tour mile traveled and the fixed cost per month.
2. 2. Develop a formula to express the cost behavior exhibited by the company’s maintenance cost.
3. 3. Predict the level of maintenance cost that would be incurred during a month when 22.000 tour miles are driven. (Remember to express your answer in terms of the real.)
4. 4. Build a spreadsheet: Construct an Excel spreadsheet to solve all of the preceding requirements. Show how the solution will change it the following information changes: in March there were 21,000 miles traveled and the cost was 12,430 real.