Question/ Icosagon Pty Ltd offers a helicopter service from Victorian regional towns to Melbourne Airport. Each of its 20 helicopters makes between 1,000 to 2,000 trips per year. The records indicate that a helicopter that has made 1,000 trips in the year incurs an average operating cost of $270 per trip and the one that has made 2,000 trips in the year incurs an average operating cost of $230 per trip.

Required

(a) Using the high-low method, estimate the linear cost function y = a +bX, where y is the total annual operating cost of a helicopter and X is the number of trips it makes to Melbourne Airport during the year.

(b) In the cost function y = a + bx, which one represents fixed cost and which represents variable cost?

(c) If Icosagon Pty Ltd expects each helicopter to make, on average, 1,200 trips in the coming year, what should its estimated operating expenses for the helicopter fleet be?