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

Question

Hoi Chong Transport, Ltd, operates a fleet of delivery trucks in Singapore The company has determined that if a truck is driven 110,000 kilometers during a year, the average operating cost is 10.60 cents per kilometer. If a truck is driven only 63,000 kilometers during a year, the average operating cost increases to 14 40 cents per kilometer (The Singapore dollar is the currency used in Singapore ) Requirement 1: Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Round the variable cost per kilometer to 3 decimal places and the fixed cost to the nearest dollar amount. Omit the "$" sign in your response.) Variable cost per kilometen Fixed cost per year Requirement 2: the form Y-a+ bX (Round the variable cost per kilometer to

Explanation / Answer

Answer: Requirement 1:

Change in variable cost per unit=Change in cost/Change in units

=(11660-9072)/(110000-63000)

=2588/47000 Km

=5.506 cents per Km

Fixed cost=Total cost-Variable cost

=11660-(110000*5.506/100)

=11660-6056.6

=5603.4

Variable cost per Km=$6056.6

Fixed cost=$5603.4

Answer:Requirement2

y=$5603.4+$(5.506/100)X

Answer: Requirement 3:

Total annual cost=$5603.4+$(5.506/100)*97000 Km

=10944.22

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