6#1

Jungemann,

owner of

Flower Direct,

operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee,

Jungemann

wants to set the delivery fee based on the distance driven to deliver the flowers.

Jungemann

wants to separate the fixed and variable portions of

her

van operating costs so that

she

has a better idea how delivery distance affects these costs.

She

has the following data from the past seven months:

LOADING...

(Click the icon to view the data.)Use the high-low method to determine

Flower Direct's

cost equation for van operating costs. Use your results to predict van operating costs at a volume of

14,500

miles.

Let's begin by determining the formula that is used to calculate the variable cost (slope).

=

Variable cost (slope)

Now determine the formula that is used to calculate the fixed cost component.

-

=

Fixed cost

Use the high-low method to determine

Flower Direct's

operating cost equation. (Round the variable cost to the nearest cent and the fixed cost to the nearest whole dollar.)

y =

x +

Use the operating cost equation you determined above to predict van operating costs at a volume of

14,500

miles.

The operating costs at a volume of 14,500 miles is

.

Data table

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Month	Miles Driven	Van Operating Costs
January. . . . . .	15,500	$5,390
February. . . . .	17,400	$5,280
March. . . . . .	15,400	$4,960
April. . . . . . . .	16,300	$5,340
May. . . . . . . .	16,500	$5,450
June. . . . . . .	15,200	$5,230
July. . . . . . . . .	14,400	$4,680