Reference no: EM132577612

1. "On Time", a popular express delivery service in London, ON runs a fleet of express vans. The organization has been collecting cost information related to miles covered for the past year with the following results. Where a van is driven 105,000 kilometers during a year, the average operating cost is 11.4 cents per kilometer. However, when a van is driven only 70,000 kilometers during the year the average operating cost increases to 13.4 cents per kilometer.

Question (a) estimate for the variable and fixed cost elements of the annual cost of truck operation, using the high-low method.

                                         Units                 Cost (unit x cost)               

High Activity Level     105,000 km                 $1,197,000

Low Activity Level          70,000 km                 $938,000

Change                          35,000 km                   $259,000

Question (b) Express the variable and fixed costs in the form Y = a + b(X).