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Question(s) / Instruction(s):

Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 105,000 kilometers during a year, the average operating cost is 11.4 cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average operating cost increases to 13.4 cents per kilometer.

Requirements:

1.            Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation.

2.            Express the variable and fixed costs in the form Y = a + bX.

3.            If a truck were driven 80,000 kilometers during a year, what total cost would you expect to be incurred?

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