1. The Mayflower Transport Company operates a fleet of delivery trucks in the Ottawa area. It has been determined that if a truck is driven 105,000 kilometers over a one year period the average operating cost is $0.114 per kilometer. If a truck is driven only 70,000 kilometers annually, the operating costs increases to $0.134 per kilometer.

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

b) Using the formula Y=a + bX, present the fixed and variable costs.

c) If a truck were driven 80,000 kilometers over a one year period, what total cost would your expect to be incurred?