Alice Jungemann, owner of Flower Power, operates a local chain of floral shops. Each shop has its
Question:
Alice Jungemann, owner of Flower Power, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Jungemann wants to set the delivery fee based on the distance driven to deliver the flowers. Jungemann wants to separate the fixed and variable portions of her van operating costs so that she has a better idea how delivery distance affects these costs. She has the following data from the past seven months:
MonthKilometresDrivenVan Operating Costs
January .........................15,800$5,460
February .......................17,3005,680
March ...........................14,6004,940
April .............................16,0005,310
May..............................17,1005,830
June .............................15,4005,420
July..............................14,1004,880
February and May are always Flower Power's biggest months because of Valentine's Day and Mother's Day, respectively.
What is the high-low method to determine Flower Power's cost equation for van operating costs. Use your results to predict van operating costs at a volume of 15,000 kilometers?