A floral shop is analyzing the cost of making deliveries. They believe miles dri
ID: 2425225 • Letter: A
Question
A floral shop is analyzing the cost of making deliveries. They believe miles driven is the cost driver of delivery van operating costs. Here is historical data on miles and costs. Use the High-Low method to determine the cost function for this cost. What would predicted van operating costs be at 17087 miles?
Enter your final answer to two decimal places.
Miles Driven Van Operating Costs January 15500 $5,400 February 17500 $5,350 March 14400 $4,980 April 16400 $5,280 May 16900 $5,580 June 15300 $5,010 July 13500 $4,590Explanation / Answer
Highest activity = 17,500 at cost of 5,350
Lowest Activity = 13,500 at cost of 4,590
So variabe cost per mile = change in Cost / change in Miles = 760 / 4,000 = 0.19 per mile
Fixed Cost = 5,350 - (17,500 X 0.19) = 2,025
Cost for 17,087 miles = ( 17,087 X 0.19 ) + 2,025 = 5,271.53
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