Question

Exercise 5A-3 Cost Behavior; High-Low Method (L05-10) Hol Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 168,000 kilometers during a year, the average operating cost is 13.2 cents per kilometer. If a truck is driven only 112,000 kilometers during a year, the average operating cost increases to 16.7 cents per kilometer. Required: 1. Using the high-low method, estimate the variable operating cost per kilometer and the annual fixed operating cost associated with the fleet of trucks. 2. Express the variable and fixed costs in the form Y = a + bx. 3. If a truck were driven 140,000 kilometers during a year, what total operating cost would you expect to be incurred? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Using the high-low method, estimate the vari operating cost per kilometer and the annual fixed operating cost associated with the fleet of trucks. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places.) Variable cost Fixed cost per kilometer per year 1 Required 2 >

Answer 1

112,000 lem ☺ Given Given Highest Activity level = 168,000 km lowest Activity level = Operating arg. Gst at Highest Activity = 13.2 unt! km. & Cast at lowest Activity - 16.7 cent per km. : Variable est ( rg Ost at high level X Highest Act level Arg Gist at lowest leve x lowest Act level 2 High Met. level - low Act level 168000 X 13.2. 112,000 X 16.7 16800s-112000 6.21 cent / kany. Fixed Est = Total Ost at high level - variable est 168,000 X 13. 2 168,90 X 6.8 Q 1,176,000 cents Take 1,176, eso & b. & b = 6. then ly = 1,176,000+ 6.20x a = Take y x 14,900 then y= 1, 176,000 & 6.2 X 140, 2,044,000 cents 200 cs Scanned with CamScanner