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Question - Rio Bus Tours has incurred the following bus maintenance costs during the recent tourist season. (The real is Brazil's national monetary unit. On the day this exercise was written, the real was equivalent in value to 0.2545 U.S. dollar.)
Month
Miles Travelled by Tour
Buses Cost
November
8,500
11,400 real
December
10,600
11,600
January
12,700
11,700
February
15,000
12,000
March
20,000
12,500
April
8,000
11,000
Required -
1. Use the high-low method to estimate the variable cost per tour mile travelled and the fixed cost per month.
2. Develop a formula to express the cost behavior exhibited by the company's maintenance cost.
3. Predict the level of maintenance cost that would be incurred during a month when 22,000 tour miles are driven.
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