E3.24 LO 3.5 Approximating a curvilinear cost: service firm The behaviour of the monthly repair and maintenance cost for the Benson Bus Company is shown by the solid line in the following graph. The dashed line depicts a semivariable cost approximation of the company'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?

(a) 20000 kilometres

(b) 40000 kilometres

(c) 70000 kilometres

(d) 80000 kilometres 2. If the relevant range is deemed to be between 50000 and 70000 kilometres per month, how good is the approximation of repairs and maintenance cost provided by the semivariable cost function? What if the relevant range is deemed to be between 80 000 and 100000 kilometres per month?

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Monthly repair and maintenance costs Actual cost (curvilinear) $8000 $6.000 $4000 $2.000 50 50 26 10 20 30 40 60 00 16 70 Approximation (semivariable) 80 90 100 Thousands of kilometres driven