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Question -
Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 147,000 kilometers during a year, the average operating cost is 8.7 cents per kilometer. If a truck is driven only 98,000 kilometers during a year, the average operating cost increases to 9.6 cents per kilometer.
Required -
1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the trunk operation.
2. Express the variable and fixed costs in the form Y = a + bx.
3. If a truck were driven 122,000 kilometers during a year, what total cost would you expect to be incurred?
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