Question

Johnson Trucking Company wants to determine a fuel surcharge to add to its customers' bills based on the number of miles driven to each area. It wants to separate the fixed and variable portion of the truck's operating costs so it has a better idea of how distance affects these costs. Johnson Trucking Company has the following data available. Month January February March April May June Miles driven 16,200 17,000 19,000 16,500 17,400 15,000 Total operating costs $22,650 $23,250 $24,000 $22,875 $23,550 $22,000 Using the high-low method, the fixed costs in a month are (Round any intermediary calculations to the nearest cent.) O A. $46,000 OB. $14,500 OC. $9,500 OD. $2,000

Answer 1

Variable cost per mile = Change in Cost/Change in mile = (24000-22000)/(19000-15000) = 0.50

Fixed cost = Total Cost-Variable cost = 24000-(19000*.50) = 14500

So answer is b) $14500