Really Fast Delivery Services has the collected the following information about operating expenditures for its delivery truck fleet for the past five years: YEAR Miles Operating Costs
YEAR Miles Operating Costs
2013 55000 195000
2014 70000 210000
2015 50000 180000
2016 65000 205000
2017 85000 225150
What is the best estimate of total operating expenses for 2018 using the high-low method based on total expected miles of 60,000?

A. $192,900
B. $195,000
C. $196,000
D. $201,000

Respuesta :

Answer:

A. $192,900

Explanation:

In order to compute the total operating expenses for 2018, first, we have to calculate the variable cost per miles and the fixed cost which is shown below:

Variable cost per miles = (High Operating cost - low operating cost) ÷ (High miles - low miles)

= ($225,150 - $180,000) ÷ (85,000 miles -  50,000 miles)

= $45,150 ÷ 35,000 miles

= $1.29 per miles

Now the fixed cost equal to

= High operating cost - (High miles × Variable cost per miles)

= $225,150 - (85,000 miles × $1.29)

= $225,150 - $109,650

= $115,500      

Now the estimated operating expenses would be

= Fixed cost + expected miles × variable cost per miles

= $115,500 + 60,000 × 1.29

= $115,500 + $77,400

= $192,900

 

Estimated OC  for Really Fast Delivery Services is $192,900

Variable cost as per miles = (High OC - Low OC) / (High miles - Low miles)

Variable cost as per miles = [225,150 - 180,000] / [85,000 -  50,000]

Variable cost as per miles = 45,150 / 35,000  

Variable cost as per miles = $1.29 per miles

Fixed cost  = High OC - (High miles × VC per miles)

Fixed cost = $225,150 - (85,000 × $1.29)

Fixed cost = $115,500      

Estimated OC  = Fixed cost + [Expected miles × VC per miles]

Estimated OC  = $115,500 + [60,000 × 1.29]

Estimated OC = $115,500 + $77,400

Estimated OC  = $192,900

So, Option "A" is the correct answer to the following question.

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https://brainly.com/question/14561839?referrer=searchResults

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