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    The owner/operator of Toledo Taxi Company is interested in determining the cost equation for his one-vehicle taxi service, based on the number of miles driven.

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    The owner/operator of Toledo Taxi Company is interested in determining the cost
    equation for his one-vehicle taxi service, based on the number of miles driven. To that
    end he has collected the following volume and cost data.

    Total Number of
    Month Operating Costs Miles Driven
    July $16,000 13,000
    August 17,800 14,250
    September 12,400 9,750
    October 15,100 12,500
    November 13,250 10,500
    December 11,500 9,000

    Instructions
    (a) Use the high-low method to calculate the variable and fixed cost components.
    (b) The owner feels that the maximum level of operating costs that the company can sustain,
    because of cash flow concerns, is $14,500. Determine the number of miles that
    correspond to that level of costs.
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    Solution Preview

    The owner/operator of Toledo Taxi Company is interested in determining the cost
    equation for his one-vehicle taxi service, based on the number of miles driven. To that
    end he has collected the following volume and cost data.

    Total Number of
    Month Operating Costs Miles Driven
    July $16,000 13,000
    August 17,800 ...

    Solution Summary

    You will find the answer to this puzzling question inside...

    $2.19

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