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Question One High-Low Method, High—Low Method, Cost Formulas (LO 3) During the past year, the high...

Question One

High-Low Method, High—Low Method, Cost Formulas (LO 3)

During the past year, the high and low use of three different resources for Wilson Trucking occurred in July and April.

The resources are truck depreciation, fuel, and truck maintenance.

The number of kilometres travelled is the driver. The total costs of the three resources and the related number of truck kilometres are as follows:

Resource                              Truck Kilometres      Total Cost ($)

Truck depreciation:

High                                                   46,000,000   2,800,000

Low                                                    32,400,000   2,800,000

Fuel:

High                                                   46,000,000   1,610,000

Low                                                    32,400,000   1,134,000

Truck maintenance:

High                                                   46,000,000   1,797,200

Low                                                    32,400,000   1,413,680

Required:

Use the high-low method to answer the following questions.

  1. What is the variable rate for truck depreciation? The fixed cost?
  2. What is the cost formula for truck depreciation?
  3. What is the variable rate for fuel? The fixed cost?
  4. What is the cost formula for fuel?
  5. What is the variable rate for truck maintenance? The fixed cost?
  6. What is the cost formula for truck maintenance?
  7. Using the three costs formulas that you developed, predict the cost of each resource in a month with 36,000.000 kilometres travelled.
  8. Describe the difference between a fixed cost and a variable cost.

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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