The delivery trucks of Moore's Building Supply incurred maintencace costs of $2,400 during its busiest month...
The delivery trucks of Moore's Building Supply incurred maintencace costs of $2,400 during its busiest month of 20xx, in which 8,000 miles were driven collectively. During its slowest month, $1,800 in maintenance costs were incurred, reslting from 5,000 miles being driven, Using the high-low method, what maintenance cost would the company expect to incur at 10,000 miles of driving?
a.$600
b.$2,800
c.$2,000
d.$1,600
Homework Answers
Variable cost per unit=[Total cost at highest level-Total cost at lowest level]/(Highest level-Lowest level)
=(2400-1800)/(8000-5000)
=$0.2/mile
Total fixed cost=2400-(8000*0.2)
=$800
Hence maintenance cost at 10,000 miles of driving=800+(0.2*10000)
=$2800.
NOTE:Variable cost per unit and Total fixed costs do not change with change in units.
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