Question

XxE6-26A (book/static) Question Help Melody Leigh, owner of Broadway Floral, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Leigh wants to set the delivery fee based on the distance driven to deliver the flowers. Leigh 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 seven months: (Click the icon to view the data.) Use the high-low method to determine Broadway Floral's cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16,500 miles Change in cost Change in volume = Variable cost (slope) Now determine the formula that is used to calculate the fixed cost component Total operating cost . Total variable cost = Fixed cost Use the high-low method to determine Broadway Floral's operating cost equation. (Round the variable cost to the nearest cent and the fixed cost to the nearest whole dollar.) y=s O x +$ Enter any number in the edit fields and then click Check Answer.
Please help me solve this.

Answer 1

Answer

• Cost Equation:
  Y = $ ______ x + $ ______
  >Y (Total cost) = Variable cost per mile driven + Fixed Cost per month
  >y = $ 0.20 x + $ 1,800
• Working for above variable cost and fixed cost:

	Months	Units/Miles	Cost
High Level	Feb	17,400	$                     5,280.00
Low Level	Jul	14,400	$                     4,680.00
Difference		3,000	$                         600.00
A	Difference in Cost		$                         600.00
B	Difference in units		3,000
C = A/B	Variable cost per unit		$                           0.200
Working		High Level	Low Level
A	Total Cost	$                   5,280.00	$                     4,680.00
B	Total Units	17400	14400
C	Variable cost per unit	$                           0.20	$                             0.20
D = B x C	Total Variable cost	$                   3,480.00	$                     2,880.00
E = A - D	Total Fixed Cost	$                   1,800.00	$                     1,800.00