Requirement $2.$ Can the constant in the cost function be used as an estimate of fixed delivery cost per month? Explain.

The cost function in requirement $1$ is an estimate of how costs behave

the relevant range, not at cost levels

the relevant range. If there are no

months with zero miles driven represented in the delivery cost account in the general ledger, data in that account

be used to estimate the fixed costs at the

zero miles driven level. The constant component of the cost function provides the best available starting point for a straight line that approximates how a cost behaves

within the relevant range.