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 99,000 miles during a year, the average operating cost is 10.6 cents per mile. If a truck is driven only 66,000 miles during a year, the average operating cost increases to 11.9 cents per mile. Required: 1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation.
Variable cost $ per mile Fixed cost $ per year 2. Express the variable and fixed costs in the form Y = a + bX. Y = $ + $ X 3. If a truck were driven 82,500 miles during a year, what total cost would you expect to be incurred?