Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 109,000 kilometers during a year, the average operating cost is 11.60 cents per kilometer. If a truck is driven only 88,000 kilometers during a year, the average operating cost increases to 12.80 cents per kilometer. (The Singapore dollar is the currency used in Singapore.)
Requirement 1:
Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Round the variable cost per kilometer to 3 decimal places and the fixed cost to the nearest dollar amount. Omit the "$" sign in your response.)
Variable cost per kilometer $ ?
Fixed cost per year $ ?
Requirement 2:
Express the variable and fixed costs in the form Y = a + bX. (Round the variable cost per kilometer to 3 decimal places and the fixed cost to the nearest dollar amount. Omit the "$" sign in your response.)
Y = $ + $ X
Requirement 3:
If a truck were driven 98,000 kilometers during a year, what total cost would you expect to be incurred? (Round your final answer to the nearest dollar amount. Omit the "$" sign in your response.)
Total annual cost $ ?
Answers: 2
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