Question

Move It Across Town is a delivery service that uses four small vans and six pickup trucks to deliver small to medium sized packages around the Denver Metropolitan area. The company costs include a considerable amount for gas, oil, and regular maintenance of these vehicles, which is done at a variety of service stations and repair shops. To budget vehicle expense for the upcoming year, the company’s accountant has gathered data on these expenses and the number of deliveries for each month of the current year.

we have Total vehicle expense and total delivery  

January	$63,650	645
February	$68,900	743
March	$59,439	605
April	$62,694	658
May	$57,593	555
June	$68,339	699
July	$57,866	529
August	$61,620	681
September	$52,329	516
October	$55,826	602
November	$59,192	604
December	$58,182	571

Required:

1. Use the high-low estimation method to determine the variable cost per delivery and the total fixed cost per month (assume there are no outliers).
2. How much total vehicle expense should be budgeted for in January of next year if estimated deliveries are 697?

Answer 1