Answer:
Use the high-low method to determine Flower Hour's cost equation for van operating costs.
- total cost = $1,355 + ($0.25 x total miles)
Use your results to predict van operating costs at a volume of 15,000 miles.
- total cost (15,000 miles) = $1,355 + ($0.25 x 15,000) = $5,105
Explanation:
Month Miles driven Van Operating Costs
January 15,800 $5,460
February <u>17,300</u> <u>$5,680</u>
March 14,600 $4,940
April 16,000 $5,310
May 17,100 $5,830
June 15,400 $5,420
July <u>14,100</u> <u>$4,880</u>
high cost - low cost = $5,680 - $4,880 = $800
high cost - low cost = 17,300 - 14,100 = 3,200 miles
variable cost per mile = $800 / 3,200 miles = $0.25 per mile
total variable cost when driving 14,100 miles = 14,100 miles x $0.25 per mile = $3,525
total fixed cost = $4,880 - $3,525 = $1,355
total cost = $1,355 + ($0.25 x total miles)
total cost (15,000 miles) = $1,355 + ($0.25 x 15,000) = $5,105
