Heli Travel offers helicopter service from Canberra to Cooma. Each of its 10 helicopters makes between 1000 and 2000 round trips per year. The records indicate that a helicopter that made 1000 round trips in the year incurs an average operating cost of $350 per round trip, and one that has made 2000 round trips in the year incurs an average operating cost of $300 per round trip. The following table provides Heli Travel's annual trip and cost data.

Annual Round Trips (1)Operating cost Per Round Trip (2)Annual Operating Cost (1) x (3)2000$300$600 0001000$350$350 000

In addition to using high-low method for estimating annual operating cost, Heli Travel's Management Accountant also uses annual data from past years to estimate annual operating cost using regression analysis and has obtained theregression line asy= $110 000 + $230Xwith Annual Operating Cost as the dependent variable and Annual Round Trips as the independent variable. TheR2value of the regression line is0.8961.

Required:

(a) Using the high-low method, estimate the linear relationshipy = a + bX, yis the total annual operating cost of a helicopter andXis the number of round trips it makes to Cooma during the year.

(b) If Heli Travel expects each helicopter to make, on average, 1200 round trips in the coming year, what should the estimated operating cost budget for the helicopter fleet be?

(c) Use the regression line to calculate the cost of 1200 round trips.

(d) Evaluate Heli Travel's regression line using the criteria of Goodness of Fit.

(e) Will high and low point method of estimating annual operating cost or regression method provide accurate estimate of Canberra-Cooma round trips cost of Heli Travel? Explain.