# The delivery trucks of Slavin Transport Company incurred \$3-600 of mai.docx

3. Feb 2023
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### The delivery trucks of Slavin Transport Company incurred \$3-600 of mai.docx

• 1. The delivery trucks of Slavin Transport Company incurred \$3,600 of maintenance costs during the busiest month of 2004, in which 12,000 miles were driven collectively. During the slowest month, \$2,800 in maintenance costs were incurred, and 8,000 miles were driven. Using the high- low method, what maintenance cost would the company expect to incur if 15,000 miles were driven? A. \$3,000 B. \$4,400 C. \$4,000 D. \$4,200 Solution Remember that the method is to first split the costs into variable and fixed components. To do that, we need to make this formula: (C2 - C1) / (V2 - V1) (V=Volume and C = Cost. "!" and "2" are highest and lowest) SO Variable = (3600 - 2800) / (\$12000 - \$8000) 800 / \$4,000 or 20 cents a unit. NEXT we have to calculate the estimated FIXED costs. Fixed Costs = TOTAL COSTS - Total Variable costs We can use EITHER hi or low. Lets use High Fixed = \$3600 - (20 cents * 12000 miles) Fixed = \$3600 - \$2400 Fixed = \$1200 (note that for the LOW volume of miles it also works - Total costs = \$1200 (fixed) + Variable (8000 miles * 25cents)
• 2. Total costs = \$1200 + 2000 Total costs = \$3200 NOW we move to solving the answer of costs at 15000 miles: Total costs = fixed (\$1200) + Variable (20 cents * 15000 miles) Total costs = \$1200+ 3000 Total costs = \$4200 Answer D ) 4200