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Kathy Woo, owner of Rose Ready, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat
Kathy Woo, owner of Rose Ready, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Woo wants to set the delivery fee based on the distance driven to deliver the flowers. Woo 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: (Click the icon to view the data.) Use the high-low method to determine Rose Ready'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). Change in cost Change in volume Variable cost (slope) Now determine the formula that is used to calculate the fixed cost component. Total operating cost Total variable cost Fixed cost Use the high-low method to determine Rose Ready's operating cost equation. (Round the variable cost to the nearest cent and the fixed cost to the nearest whole dollar.) y= X+ i Data Table - - X ca er he charging a her van op Month Miles Driven Van Operating Costs ady January....... 15,500 $5,390 an operatin February..... 17,400 $5,280 ed March ....... 15,400 $4,960 Vo April.... 16,300 $5,340 May.... 16,500 $5,450 ate June........ 15,200 $5,230 ole July..... 14,400 $4,680 ady nt and the f
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