Hoi Chong Transport, Limited, operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 138,000 kilometers during a year, the average operating cost is 14.8 cents per kilometer. If a truck is driven only 92,000 kilometers during a year, the average operating cost increases to 18.6 cents per kilometer.

Required:

1. Using the high-low method, estimate the variable operating cost per kilometer and the annual fixed operating cost associated with the fleet of trucks.

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

3. If a truck were driven 115,000 kilometers during a year, what total operating cost would you expect to be incurred?