QUESTION 5

1. Need a Hair Cut Ltd. operates a fleet of rental cars in Kingsvilli.The company has determined that if a car is driven 105,000 kilometres during a year, the average operating cost is 12.665 cents per kilometre. If a car is driven only 70,000 kilometres during a year, the average operating cost increases to 14.5 cents per kilometre. Note: Please do not round the decimal places of cost per kilometre, which is 12.665 and 14.5 cents per km.
2. Required:
3. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (15 marks)
4. Express the variable and fixed costs in the formY=a+bX. (5 marks)
5. If a rental car were driven 80,000 kilometres during a year, what total cost would you expect to be incurred? (5 marks)