High-low Method: It is measure of separating the fixed cost and variable cost in the mixed operating cost of the company. 1. The estimated variable operating cost per kilometer and the annual fixed operating cost. 2. Express the variable and fixed cost in the form of Y = a + b X 3. If the truck were driven 76,000 kilometers during a year, what total operating cost would you expect to incur.

Question

Cost Behavior; High-Low Method 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 11.4 cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average operating cost increases to 13.4 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 80,000 kilometers during a year, what total operating cost would you expect to be incurred?

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Question

Chapter 6.A, Problem 3E

To determine

High-low Method: It is measure of separating the fixed cost and variable cost in the mixed operating cost of the company.

1. The estimated variable operating cost per kilometer and the annual fixed operating cost.

2. Express the variable and fixed cost in the form of Y=a + bX

3. If the truck were driven 76,000 kilometers during a year, what total operating cost would you expect to incur.

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