Problem:

Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 105,000 kilometers during a year, the average operating cost is 11.4 cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average operating cost increases to 13.4 cents per kilometer.(The Singapore dollar is the currency used in Singapore.)

Requirement 1:

Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Round the variable cost per kilometer to 3 decimal places. Omit the "$" sign in your response.)

Variable cost per kilometer	$
Fixed cost per year	$

Requirement 2:

Express the variable and fixed costs in the form Y = a + bX. (Round the variable cost per kilometer to 3 decimal places. Omit the "$" sign in your response.)

Y =

$

+

$

X

Requirement 3:

If a truck were driven 80,000 kilometers during a year, what total cost would you expect to be incurred? (Omit the "$" sign in your response.)

Total annual cost

$

Work done so far:

HIGH :11.4 * 105,000 = 1,197,000

LOW: 13.4 * 70,000 = 938,000

Total Variable cost = 105,000 * 7.4 = 777,000

Fixed cost = 1,197,000 - 777,000 = 420,000

What am I doing wrong ? This is incorrect so far starting at the variable cost and fixed cost