Question

Hoi Chong Transport, Ltd. operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 150,000 kilometres during a year, the average operating cost is 13.1 cents per kilometre. If a truck is driven only 75,000 kilometres during a year, the average operating cost increases to 15.0 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 3 decimal places.)

  

2.	Express the variable and fixed costs in the form Y = a + bX. (Round the "Variable cost" to 3 decimal places.)

      

3.	If a truck were driven 85,000 kilometres during a year, what total cost would you expect to be incurred? (Round your intermediate calculations to 3 decimal places.)

Answer 1