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Question - Hoi Chong Transport, Ltd. operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 111,000 kilometres during a year, the average operating cost is 12.506 cents per kilometre. If a truck is driven only 76,000 kilometres during a year, the average operating cost increases to 15.1 cents per kilometre. (The Singapore dollar is the currency used in Singapore.)
Required -
1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation.
2. Express the variable and fixed costs in the form Y = a + bX.
3. If a truck were driven 86,000 kilometres during a year, what total cost would you expect to be incurred?
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