Chapter 6, Problem 6.26AE

Continuation of E6-25A: High-low method (Learning Objective 4)

Refer to Broadway Floral’s data in E6-25A. Use the high-low method to determine Broadway Floral’s cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16,500 miles.

Melody Leigh, owner of Broadway Floral, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Leigh wants to set the delivery fee based on the distance driven to deliver the flowers. Leigh wants to separate the fixed and variable portions of her van operating costs so that she has a better idea of how delivery distance affects these costs. She has the following data from the past seven months:

Month	Miles Driven	Van Operating Costs
January	15,500	$5,390
February	17,400	$5,280
March	15,400	$4,960
April	16,300	$5,340
May	16,500	$5,450
June	15,200	$5,230
July	14,400	$4,680