Kim Tran, owner of Rose Red, operates a local chain of floral shops. Each shop has...
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Kim Tran, owner of Rose Red, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Tran wants to set the delivery fee based on the distance driven to deliver the flowers. Tran 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: (Click the icon to view the data.) Use the high-low method to determine Rose Red's cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16,000 miles. Let's begin by determining the formula that is used to calculate the variable cost (slope). Change in cost Change in volume = Variable cost (slope) Now determine the formula that is used to calculate the fixed cost component. Total operating cost Total variable cost = Fixed cost Use the high-low method to determine Rose Red's operating cost equation. (Round the variable cost to the nearest cent and the fixed cost to the nearest whole dollar.) y = www X + Data table Month January ...... 15,900 18,000 February ..... March...... 15,300 16,300 17,000 15,700 15,000 April May June July .... Miles Driven Van Operating Costs $5,420 $5,460 $5,100 $5,290 $5,520 $5,150 $4,950 Kim Tran, owner of Rose Red, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Tran wants to set the delivery fee based on the distance driven to deliver the flowers. Tran 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: (Click the icon to view the data.) Use the high-low method to determine Rose Red's cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16,000 miles. Let's begin by determining the formula that is used to calculate the variable cost (slope). Change in cost Change in volume = Variable cost (slope) Now determine the formula that is used to calculate the fixed cost component. Total operating cost Total variable cost = Fixed cost Use the high-low method to determine Rose Red's operating cost equation. (Round the variable cost to the nearest cent and the fixed cost to the nearest whole dollar.) y = www X + Data table Month January ...... 15,900 18,000 February ..... March...... 15,300 16,300 17,000 15,700 15,000 April May June July .... Miles Driven Van Operating Costs $5,420 $5,460 $5,100 $5,290 $5,520 $5,150 $4,950
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