High-Low Cost Estimation Assume the local YRC Worldwilde delivery service hub has the following information available...
High-Low Cost Estimation
Assume the local YRC Worldwilde delivery service hub has the
following information available about fleet miles and operating
costs:
| Year | Miles | Operating Costs |
|---|---|---|
| 2017 | 556,000 | $175,600 |
| 2018 | 684,000 | 214,000 |
Use the high-low method to develop a cost-estimating equation for
total annual operating costs. (Let X = annual fleet miles.)
Total annual costs = Answer + Answer * X
Homework Answers
| 1) | Variable portion of the cost = (Total cost at highest level of activity-Total cost at lowest level activity)/(Highest activity-Lowest activity) | |
| = (214000-175600)/(684000-556000) = | $ 0.30 | |
| 2) | Fixed portion of the cost = 214000-684000*0.30 = | $ 8,800 |
| 3) | Total annual costs = $8,800 + $0.30*X | |
| where X = annual fleet miles |
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High-Low Cost Estimation
Assume the local YRC Worldwilde delivery service hub has the
following information available...
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