Solution 1:
Total cost at 150000 Kms = 150000*.124 = $18,600
Total cost at 100000 Kms = 100000*$0.152 = $15,200
Variable cost per Km using high low method = (Cost at high level - Cost at low level) / (High level activity - Low level activity)
= ($18,600 - $15,200) / (150000 - 100000) = $0.068 per Km
Fixed costs = $18,600 - (150000*$0.068) = $8,400
solution 2:
Cost function Y = $8,400 + $0.068 X
Solution 3:
Expected operating cost at 125000 Kms = $8,400 + (125000*$0.068) = $16,900
Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined...
Hoi Chong Transport, Ltd., operates a fleet of delivery trucks
in Singapore. The company has determined that if a truck is driven
141,000 kilometers during a year, the average operating cost is
12.1 cents per kilometer. If a truck is driven only 94,000
kilometers during a year, the average operating cost increases to
14.6 cents per kilometer.
Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 141,000...
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in Singapore. The company has determined that if a truck is driven
111,000 kilometers during a year, the average operating cost is
12.2 cents per kilometer. If a truck is driven only 74,000
kilometers during a year, the average operating cost increases to
14.1 cents per kilometer.
Required:
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Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 105,000 kilometers during a year, the average operating cost is 11.6 cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average operating cost increases to 13.3 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...