The behavior of the annual maintenance and repair cost in the Bus Transportation Department of the Summerset Public School District is shown by the solid line in the following graph. The dashed line depicts a semivariable-cost approximation of the department’s repair and maintenance cost.

Required:
1. What is the actual (curvilinear) and estimated (semivariable) cost shown by the graph for each of the following activity levels?
                                          Actual                            Estimated
a. 20,000 miles
b. 40,000 miles
c. 60,000 miles
d. 90,000 miles
2. How good an approximation does the semivariable-cost pattern provide if the department’s relevant range is 40,000 to 60,000 miles per month? What if the relevant range is 20,000 to 90,000 miles per month?

 

Transcribed Image Text:

Monthly repair and maintenance cost $4,000 $3,000 $2,000 $1,000 10 20 30 40 50 60 70 80 90 Actual cost (curvilinear) 100 Approximation (semivariable) Thousands of miles driven Monthly repair and maintenance cost $4,000 $3,000 $2,000 $1,000 10 20 30 40 50 60 70 80 90 Actual cost (curvilinear) 100 Approximation (semivariable) Thousands of miles driven

Answer rating: 100% (QA)

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