Fast Eddie’s Limo Service operates a fleet of limousines. Management wants to estimate the fixed and/ High-kow Mettod variable costs per mile. A recent trade publication indicated that variable costs should be no more than (LO 3)

$.25 per mile. To check his costs against those indicated in the trade journal, Fast Eddie collected the following data for his limousine fleet for last month:

Limousine 4-- Duy XeTrk Or, Lape b~ vrile m1 A xe Number Costs Miles (‘ =

OOLGS, £ iaitt $3,500 12,400 ue ut»

Die, Shale rate 3,400 11,800 fate ol Vie abieaic a Ohh 3,200 40,600 7 A Eee 3,800 11,500 g sth ibe alee pean 3,500 11,800 wf

(er peteWanhe e e4 4,000 13,200 H aO 900~ 3003o: 0 _ boo

(ee ee oe 3,200 9,800 FZ Oped oo Hous = Oss Siete mi re 3,000 9,200 L_ ples ee : P2r nls RIOsaR th,enc e 4,200 11,700 tier eee 3,900 12,300 Required ftC arls

a. Use the high-low method to estimate the fixed and variable portions of overhead costs based on rl go00 € 125 miles driven.
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b. What is the estimated total cost of driving one limousine 10,000 miles?
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c. Fast Eddie has heard that the high-low method has a major limitation compared to simple regression.
What isi?