Question

Mike drove 100 miles in a rental car and was charged $58.00. Jane rented the same car after Mike had rented it and was charged $65.00 for 170 miles. Write an equation to represent y, the total rental cost, in terms of x, the number of miles driven.

Answer 1

y= 48 + 0.1x

x= miles driven

Explanation:

We need to calculate the fixed and variable cost (per mile) of renting a car. To do that, we will use the high-low method:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (65 - 58) / (170 - 100)

Variable cost per unit= $0.1 per mile

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 65 - (0.1*170)

Fixed costs= $48

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 58 - (0.1*100)

Fixed costs= $48

y= 48 + 0.1x

x= miles driven