KathyKathy

CoughlinCoughlin,

owner of

Flower PetalFlower Petal,

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

CoughlinCoughlin

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

CoughlinCoughlin

wants to separate the fixed and variable portions of

herher

van operating costs so that

sheshe

has a better idea how delivery distance affects these costs.

SheShe

has the following data from the past seven months:

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(Click the icon to view the data.)

Use the high-low method to determine

Flower PetalFlower Petal's

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

16 comma 00016,000

miles.

Month

Miles Driven

Van Operating Costs

January. . . . . . . . . . . . . . .

16,000

$5,490

February. . . . . . . . . . . . . . .

17,500

$5,700

March. . . . . . . . . . . . . . . . .

14,900

$4,910

April. . . . . . . . . . . . . . . . . .

16,200

$5,340

May. . . . . . . . . . . . . . . . . .

16,900

$5,820

June. . . . . . . . . . . . . . . . . .

15,100

$5,410

July. . . . . . . . . . . . . . . . . . .

14,500

$4,920

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 PetalFlower Petal'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

16 comma 00016,000

miles.

The operating costs at a volume of 16,000 miles is $

.