Question

Kim Jungemann owner of Tulip Time, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery tes Jungemann wants to set the delivery fee based on the distance driven to deliver the flowers Jungemann wants to separate the foxed and variable portions of her van operating costs so that she has a better idea how delivery distance affects these costs. She has the following data from the past seven months (Click the icon to view the data) Use the high-low method to determine Tulip Time's cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16,500 miles Data Table Data Table Let's begin by determining the formula that is used to calculate the variable cost (slope) Month Change in cost / Change in volume = Variable cost (slope) Now determine the formula that is used to calculate the foxed cost component Total operating cost . Total variable cost = Fixed cost Use the high-low method to determine Tulip Time's operating cost equation (Round the variable cost to the nearest cent and the fixed cost to the nearest whole dollar) y=$ 35 $ 53980 January February March April May June July................ Miles Driven 15,900 18,000 15,300 16300 17,000 15,700 15,000 Van Operating costs $5420 $5,460 $5,100 $5,290 $5,520 $5,150 $4,950 Print Done

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

Answer Part 1) Formula for Variable cost (Slope) Change in cost 1 Change in Volume = Variable Cost (Slope) Part 2) Formula for Fixed Cost Total Operating cost Variable Cost = Fixed Cost Part 3) Variable cost per Mile = (High Level cost - Low Level Cost)/(high Level Km - Low Level km) = (5460-4950)/(18000-15000) = 510/3000 = $ 0.17 Fixed cost = Total operating cost-veriable cost = 5460 - ( 18000*.17) = $ 2400 Thus the final answer is Y = $0.17 X+ $ 2400