Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company’s cost analyst has determined that if a truck is driven 126,000 miles during a year, the average operating cost is 13.3 cents per mile. If a truck is driven only 84,000 miles during a year, the average operating cost increases to 15.5 cents per mile.

**Required**

1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation.

**(Round the “Variable cost per mile” to 3 decimal places and the “Fixed cost” to the nearest dollar amount. Omit the “$” sign in your response.)**

Variable cost |
$ |
per mile |

Fixed cost |
$ |
per year |

2. Express the variable and fixed costs in the form

*Y* =

*a* +

*bX*.

**(Round the “Variable cost**

**per mile” to 3 decimal places and the “Fixed cost” to the nearest dollar amount. Omit the “$” sign in your response.)**

Y = |
$ |
+ |
$ |
X |

3. If a truck were driven 105,000 miles during a year, what total cost would you expect to be incurred?

**(Round the “Variable cost**

**per mile” to 3 decimal places. Round your intermediate and final answers to the nearest dollar amount. Omit the “$” sign in your response.)**

Total annual cost |
$ |