We Deliver operates a fleet of delivery trucks in Halifax. Analysis shows that if a truck is driven 105,000 kilometres during a year, the average operating cost is 11.4 cents ($0.114) per kilometer. If a truck is driven only 70,000 kilometres during a year, the average operating cost increases to 13.4 cents ($0. 134) per kilometer.

Required:

1. Using the high- low method, estimate the variable and fixed cost elements of the annual cost of truck operation.

2. Express the variable and fixed costs in the form Y = a + bX.

3. If a truck was driven 80,000 kilometers during a year, what total cost would you expect to be incurred?