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JulijaS [17]
3 years ago
8

Resling Travel offers helicopter service from suburban towns to John F. Kennedy International Airport in New York City. Each of

its 9 helicopters makes between 1,300 and 2,300 ​round-trips per year. The records indicate that a helicopter that has made 1,300 ​round-trips in the year incurs an average operating cost of ​$600 per​ round-trip, and one that has made 2,300 ​round-trips in the year incurs an average operating cost of ​$450 per​ round-trip.
Required:
1. Using the high-low method, estimate the linear relationship y =a + bX , where y is the total annual operating cost of a helicopter and X is the number of round-trips it makes to JFK airport during the year.
2. Give examples of costs that would be included in a and in b.
3. If Reisen Travel expects each helicopter to make, on average, 1,200 round-trips in the coming year, what should its estimated operating budget for the helicopter fleet be?
Business
1 answer:
Reptile [31]3 years ago
3 0

Answer:

1.  y = $255 + $0.15 X

2. <u>Examples of costs that would be included in a and in b.</u>

a - Fixed Cost

Example : Maintenance Cost over the period

b - Variable Cost

Example : Maintenance Cost after every flight

3. $435

Explanation:

<u>linear relationship</u>

Fist determine the high point and the low point

High : 2,300 ​round-trips

Low  : 1,300 ​round-trips

Then determine the variable cost

<em>Variable Cost = Difference between Overheads ÷ Deference in Independent variables </em>

                       = ($600 - $450) ÷ (2,300 - 1,300)

                       = $0.15 per  round-trip

Determine the fixed cost element

<em>Fixed Cost = Total Overheads - Variable cost at a point</em>

Choosing the Highest point this will be :

Fixed Cost = $600 - $0.15 × 2,300

                  = $255

Then the  linear relationship y =a + bX will be  :   y = $255 + $0.15 X

<u>Examples of costs that would be included in a and in b.</u>

a - Fixed Cost

Maintenance Cost over the period

b - Variable Cost

Maintenance Cost after every flight

<u>Operating budget for the helicopter fleet with  1,200 round-trips in the coming year</u>

y = $255 + $0.15 X

   = $255 + $0.15 × (1,200)

   = $435

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