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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Cost Behavior; High-Low Method
Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company’s cost analyst has determined that if a truck is driven 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the average operating cost increases to 13.6 cents per mile.
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 100,000 miles during a year, what total cost would you expect to be incurred?
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