FlyHigh Vacations offers helicopter service from suburban towns to Heathrow Airport in the United Kingdom. Each of
Question:
FlyHigh Vacations offers helicopter service from suburban towns to Heathrow Airport in the United Kingdom. Each of its 10 helicopters makes between 1,000 and 2,000 round-trips per year. The records indicate that a helicopter that has made 1,000 round-trips in the year incurs an average operating cost of $350 per round-trip, and one that has made 2,000 round-trips in the year incurs an average operating cost of $300 per round-trip.
Required
1. Using the high-low method, estimate the linear relationship y = a + bX, where y is the total annual operating cost of a helicopter and X is the number of round-trips it makes to HeathrowAirport during the year.
2. Give examples of costs that would be included in a and in b.
3. If FlyHigh Vacations expects each helicopter to make, on average, 1,200 round-trips in the coming year, what should its estimated operating budget for the helicopter fleet be?
Step by Step Answer:
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 9780135628478
17th Edition
Authors: Srikant M. Datar, Madhav V. Rajan