Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company's cost analyst has determined that if a truck is driven 162,000 miles during a year, the average operating cost is 13.2 cents per mile. If a truck is driven only 108,000 miles during a year, the average operating cost increases to 16.6 cents per mile.
| Required: |
| 1. |
Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Round the "Variable cost per mile" to 3 decimal places and the "Fixed cost" to the nearest dollar amount.)
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| Variable cost |
$ |
per mile |
| Fixed cost |
$ |
per year |
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| 2. |
Express the variable and fixed costs in the form Y = a + bX. (Round the "Variable cost per mile" to 3 decimal places and the "Fixed cost" to the nearest dollar amount.)
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| 3. |
If a truck were driven 135,000 miles during a year, what total cost would you expect to be incurred?(Round the "Variable cost per mile" to 3 decimal places. Round your intermediate and final answers to the nearest dollar amount.)
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