Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The

Question

Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 123,000 kilometers during a year, the average operating cost is 13.2 cents per kilometer. If a truck is driven only 82,000 kilometers during a year, the average operating cost increases to 15.4 cents per kilometer.

Required:
1.

Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places and Fixed cost answer to nearest whole dollar amount.)

Express the variable and fixed costs in the form Y = a + bX. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places.)

        

        

If a truck were driven 102,500 kilometers during a year, what total cost would you expect to be incurred?(Do not round intermediate calculations.)

     

Kilometers Total Annual Driven Cost High level of activity Low level of activity Change 0 $0 Variable cost per kilometer per kilometer Fixed cost per year

Explanation / Answer

1./

##

TOTAL ANNUAL COST FOR 123000 KILOMETER (123000 * $13.2) = $1623600

TOTAL VARIABLE COST FOR 123000 KILOMETER (123000 * $8.8) = ($1082400)

TOTAL FIXED COST FOR THE YEAR = $541200

-------------------------------------------------------------------------------------------------------------------------------------------------------

2./

Y = A + BX

TOTAL COST = FIXED COST + VARIABLE COST * TOTAL KILOMETER DRIVEN

----------------------------------------------------------------------------------------------------------------------------------------------------------------

3./

TOTAL COST = FIXED COST + VARIABLE COST PER KILOMETER * TOTAL KILOMETER DRIVEN

   = $541200 + $8.8 * 102500

   = $541200 + $902000

   = $1443200

KILOMETERES TOTAL AMOUNT DRIVEN COST HIGH LEVEL OF ACTIVITY 123000 1623600 LOW LEVEL OF ACTIVITY 82000 1262800 CHANGE 41000 $360800 VARIABLE COST PER KILOMETER $360800 / 41000 $8.8 CENT PER KILOMETER FIXED COST PER YEAR ##
$541200

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.