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Alice, owner of a food and beverage outlet, started food delivery last year. She is interested in predicting the cost of delivering food but
Alice, owner of a food and beverage outlet, started food delivery last year. She is interested in predicting the cost of delivering food but is unsure of the best way to estimate the delivery cost. The following data were collected for the first six months. Month Number of Deliveries Jan 230 Feb 100 Mar 120 Apr 250 May 300 Jun 220 (a) (b) (c) Number of Direct Labour Hours Delivery Cost 2,600 $7,000 1,800 $4,800 1,500 $5,200 3,000 $7,300 3,500 $8,000 2,500 $6,800 Use the high-low method to determine the cost function with number of deliveries as the cost driver. (4 marks) Use the high-low method to determine the cost function with number of direct labour hours as the cost driver. (4 marks) For July, there were 250 deliveries and 3,200 direct labour hours and the delivery cost totalled $7,250. Explain which cost driver was the better predictor for July. (5 marks)
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