Question

Check 2 Hoi Chong Transport, Ltd. operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 114,00 kilometres during a year, the average operating cost is 12,509 cents per kilometre. If a truck is driven only 79,000 kilometres during a year, the average operating cost increases to 15.4 cents per kilometre. (The Singapore dollar is the currency used in Singapore.) Required: 1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation (Round the "Variable cost" to 5 decimal places. Round "Fixed cost to 2 decimal places.) its eBook Print $ eferences Variable cost Fixed cost 5.98360 per kilometre 743 895 60 per year $ 2. Express the variable and fixed costs in the form Ya+bX (Round the "Variable cost" to 5 decimal places. Round "Fixed cost" to 2 decimal places.) < Prey 2 of 2 18 Next

Answer 1

Answer:
No. of kilometers (A)	Average Cost (B)	Total cost (A x B )
114,000	12.509	$ 1,426,026
79,000	15.4	$ 1,216,600
Variable cost     = (Diff. in Costs / Diff in Kilometers )     = ( $ 1,426,026 (-) $ 1,216,600 ) / ( 114,000 (-) 79,000 )     =    $ 209,426 / 35,000	$ 5.98360	Per kilometer
Fixed cost      = $ 1,426,026 (-) ( 114,000 x $ 5.98360 )      =   $ 1,426,026 (-) $ 682,130.40	$ 743,895.60	per year
2)
Express in form of y = a + bx Where Y = Total Cost                a = Fixed Cost                b   = Variable Cost
Y   = $ 743,895.60 (+)    $ 5.98360 X
3)
Total annual Cost                  = $ 743,895.60 (+)   ( $ 5.98360 x 89,000 )	$ 1,276,436