The delivery trucks of Italiana's Pizzeria incurred maintenance costs of $2,400 during its busiest month of 2014,in which 8,000 miles were driven collectively.During its slowest month,the trucks were driven for only 5,000 miles,for a maintenance cost of $1,800.Using the high-low method,calculate the expected maintenance cost for a month in which trucks are driven for 5,350 miles?

Question

Quizplus · Accepted Answer

Using the high-low method, we first need to calculate the variable cost per mile:

Variable cost per mile = (Cost in the busiest month - Cost in the slowest month) / (Miles driven in the busiest month - Miles driven in the slowest month)
Variable cost per mile = ($2,400 - $1,800) / (8,000 - 5,000)
Variable cost per mile = $0.20

Now that we have the variable cost per mile, we can use either the busiest or slowest month to calculate the fixed cost:

Fixed cost = Total cost - (Variable cost per mile x Total miles)
Using the busiest month:

Fixed cost = $2,400 - ($0.20 x 8,000)
Fixed cost = $2,400 - $1,600
Fixed cost = $800

Using the fixed cost and the variable cost per mile, we can calculate the expected maintenance cost for a month in which the trucks are driven for 5,350 miles:

Expected maintenance cost = Fixed cost + (Variable cost per mile x Total miles)
Expected maintenance cost = $800 + ($0.20 x 5,350)
Expected maintenance cost = $800 + $1,070
Expected maintenance cost = $1,870

Therefore, the best choice is A) $1,870.

The Delivery Trucks of Italiana's Pizzeria Incurred Maintenance Costs of $2,400