Kate Smith, owner of Flower Power, operates a local chain of floral shops set th

Question

Kate Smith, owner of Flower Power, operates a local chain of floral shops set the delivery fee based has a better idea how deivery distance affects t . Each shop has its own delivery van, Instead of charging a flat delivery fee, Smith wants to on the distance driven to deliver the flowers. Smith wants to separate the fixed and variable portions of her van operating costs so that she ts She has the following data from the past seven months: a Quiz/Test Data Table osts. Use your resuits to predict van operating costs at a volume of 16,500 Miles Driven 16,000 17.500 14,900 16.200 16.900 5,100 14,500 Van Operating Conts $5,490 $5,700 $4,910 $5,340 $5,820 $5,410 $4,920 Month January February March Apri May the varabie cost to the nearest curt and the fixed oost to the nearest whoie July a volume of 16,500 miles Print Done

Explanation / Answer

HIGH - LOW METHOD : VO costs Milles Driven HIGH 5700 17500 LOW 4920 14500 change in 780 3000 Variable cost per mile = change in cost / change in volume Variable cost per mile = 780 / 3000 = 0.26 per mile Fixed costs = Total cost - Millage * variable cost per mile Fixed costs = 4920 - (14500*0.26) = $1150 Equation = y = $0.26 x + $1150 The operating costs at a volume of 16500 miles is = 0.26 * 16500 + 1150 = $5440

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