Show steps please Question 2 15 mins 8 marks detailed rucks

Show steps please

Question 2 (15 mins, 8 marks) detailed rucks, and has found that if a truck is driven 95,000 Seaside Shipping, Inc. operates a local parcel delivery service. The company keeps records relating to operating costs of t kilometres per year, the operating cost is 6.5 cents per kilometre. This cost increases to 8 cents per killometre if a truck is driven 45,000 kilometres per year .0 Required: Estimate the cost formula for truck operating costs using the high-low method

Solution

The Cost formula for truck operating cost:

Variable Cost = Change in cost/ Change in activity

= $2,575/ 50,000 = $0.0515

Fixed Cost = Total Cost - Variable cost

It can be verified as:

Total Cost = Variable Cost + Fixed Cost

= ($0.0515* 45,000) + $1,283

= $2,317 + $1,283 = $3,600   

Particulars	Km Driven	Per Km Cost	Total Cost
High level of activity	95,000	$0.065	$6,175
Low level of activity	45,000	$0.08	$3,600
Change	50,000		$2,575