Stegman, Ltd., provides nationwide passenger train service on 21,000 miles of routes.Selected operating data for fiscal 2021 are shown below. Required:
a.The above data provide three possible activity measures that could influence fuel expense.Use the high-low method to develop a cost formula for fuel expense for each of the three measures.
b.Do any of the cost formulas you developed in (a) appear to be a poor choice for estimating future train operations expense? Why?
c.Which formula do you think will make the most accurate predictions? Why?

Question

Stegman, Ltd., provides nationwide passenger train service on 21,000 miles of routes.Selected operating data for fiscal 2021 are shown below.  Required: 
a.The above data provide three possible activity measures that could influence fuel expense.Use the high-low method to develop a cost formula for fuel expense for each of the three measures.
b.Do any of the cost formulas you developed in (a) appear to be a poor choice for estimating future train operations expense? Why?
c.Which formula do you think will make the most accurate predictions? Why?

Quizplus · Accepted Answer

The Answer of Stegman, Ltd., provides nationwide passenger train service on 21,000 miles of routes.Selected operating data for fiscal 2021 are shown below.  Required: 
a.The above data provide three possible activity measures that could influence fuel expense.Use the high-low method to develop a cost formula for fuel expense for each of the three measures.
b.Do any of the cost formulas you developed in (a) appear to be a poor choice for estimating future train operations expense? Why?
c.Which formula do you think will make the most accurate predictions? Why?