Question

Alice MeyerMeyer?,owner of Flower DirectFlower Direct?, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery? fee,
MeyerMeyer wants to set the delivery fee based on the distance driven to deliver the flowers. MeyerMeyer wants to separate the fixed and variable portions of her van operating costs so that she has a better idea how delivery distance affects these costs. She has the following data from the past 7? months:
February and May are always Flower DirectFlower Direct?'s biggest months because of? Valentine's Day and? Mother's Day, respectively. Use the? high-low method to determine
Flower DirectFlower Direct?'s cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16 comma 00016,000 kilometres.
? / ? = variable cost (slope)
? - ? = fixed cost
Use the? high-low method to determine Flower DirectFlower Direct?'s operating cost equation. ?(Round the variable cost to the nearest cent and the fixed cost to the nearest whole? dollar.)
Y = $?x + $?
Use the operating cost equation you determined above to predict van operating costs at a volume of 16 comma 00016,000 kilometres
the operating costs at a volume of 16 comma 00016,000 kilometres is ?$ ?
Table :
Month Kilometres Driven Van Operating Costs
January 16,000 $5,490
February 17,500 5,700
March 14,900 4,910
April 16,200 5,340
May 16,900 5,820
June 15,100 5,410
July 14,500 4,920

Answer 1

Answer:

Flower Direct

1. Operating cost equation = $0.26x + $1,150

2. Prediction of operating costs at a volume of 16,000 is:

= $5,310

Explanation:

a) Data and Calculations:

Month    Kilometres Driven    Van Operating Costs

January           16,000                     $5,490

February          17,500                       5,700

March              14,900                        4,910

April                 16,200                       5,340

May                  16,900                       5,820

June                 15,100                        5,410

July                  14,500                       4,920

High-Low Method:

February          17,500                       5,700

July                  14,500                       4,920

Difference        3,000                          780

Variable cost per unit = $780/3,000 = $0.26

Total variable cost at February figures = $4,550 (17,500 * $0.26)

Total fixed costs at February figures = $1,150 ($5,700 - $4,550)

Operating cost equation = $0.26x + $1,150

Operating cost at a volume of 16,000 = $1,150 + $0.26 * 16,000

= $1,150 + 4,160

= $5,310