Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined...

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Accounting

Hoi Chong Transport, Ltd., operates a fleet of delivery trucksin Singapore. The company has determined that if a truck is driven102,000 kilometers during a year, the average operating cost is11.3 cents per kilometer. If a truck is driven only 68,000kilometers during a year, the average operating cost increases to12.9 cents per kilometer.
Required:
1. Using the high-low method, estimate the variable operatingcost per kilometer and the annual fixed operating cost associatedwith the fleet of trucks.
2. Express the variable and fixed costs in the form Y = a +bX.
3. If a truck were driven 85,000 kilometers during a year, whattotal operating cost would you expect to be incurred?

Answer & Explanation Solved by verified expert

3.7 Ratings (681 Votes)

1 Calculations are given below Kilometers Driven Total Annual Cost High level of activity 102000 11526 Low level of activity 68000 8772 Change 34000 2754 Variable cost per kilometer 0081 per kilometer Fixed cost per See Answer

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