Explore BrainMass

Explore BrainMass

    Speedy Parcel Service: high-low method, estimate the variabl

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company's cost analyst has determined that if a truck is driven 138,000 miles during a year, the average operating cost is 14.8 cents per mile. If a truck is driven only 92,000 miles during a year, the average operating cost increases to 18.6 cents per mile.

    Required:
    1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Round the "Variable cost per mile" to 3 decimal places and the "Fixed cost" to the nearest dollar amount. Omit the "$" sign in your response.)

    Variable cost $
    per mile
    Fixed cost $
    per year
    ________________________________________

    2. Express the variable and fixed costs in the form Y = a + bX. (Round the "Variable cost per mile" to 3 decimal places and the "Fixed cost" to the nearest dollar amount. Omit the "$" sign in your response.)

    Y = $
    + $
    X

    3. If a truck were driven 115,000 miles during a year, what total cost would you expect to be incurred? (Round the "Variable cost per mile" to 3 decimal places. Round your intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

    © BrainMass Inc. brainmass.com June 4, 2020, 2:20 am ad1c9bdddf
    https://brainmass.com/business/accounting/speedy-parcel-service-high-low-method-estimate-the-variabl-452758

    Attachments

    Solution Summary

    Your tutorial shows you how to compute the high low method, how to express the cost formula and how to make a prediction using the cost formula. See template in Excel (click in cells to see computations).

    $2.19

    ADVERTISEMENT