Question

assume that a compan operates a fleet of limousines if a limo is driven 80,000 miles during a year its average is 25 cents per mile. driven only 60,000 miles operating cost is 30 cents per mile high low method, what is the estimated fixed cost per year

Answer 1

The answer is "$12000".

Step-by-step explanation:

Calculating the total cost:

when 80,000 miles
`=(80,000* 0.25)=\$20,000`

when 60,000 miles
`=(60,000* 0.3)=\$18000`

`\text{Calculating the per mile variable cost} =\frac{[\text{Total cost of highest level-Total cost of lowest level}]}{(Highest \ level-Lowest \ level)}`

`=((20,000-18000))/((80,000-60,000))\\\\=((2,000))/((20,000))\\\\=((1,000))/((10,000))\\\\=((1))/((10))\\\\=$0.1 / mile`

So, the total fixed cost:

`=20,000-(80,000* 0.1)\\\\=20,000-8,000\\\\=\$12,000`