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?

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 Actual cost (curvilinear) Approximation (semivariable) $1,000 10 20 20 50 60 60 50 30 40 40 70 70 88 80 90 90 100 Thousands of miles driven