The city of Rockville reported the following annual cost data for maintenance work performed on its fleet of trucks.
Reporting Period (Year) Total Costs Level of Activity (Miles Driven)
Year 1 $ 750,000 225,000
Year 2 850,000 240,000
Year 3 1,100,000 430,000
Year 4 1,150,000 454,000
Year 5 1,250,000 560,000
Year 6 1,550,000 710,000
Required: (see the worksheet completed in class which has a problem similar to this one)
Use the high-low method to estimate total fixed costs and the variable cost per mile. State your results in the cost equation form Y = F + v(x) Show your work.
2. What would the estimated costs be if the truck drove 500,000 miles.