QUESTION TWO

The transport department of Norwest Council operates a large fleet of vehicles. These vehicles are used by the various departments of the Council. Each month a statement is prepared for the transport department comparing actual results with budget. One of the items in the transport departments monthly statement is the cost of vehicle maintenance.

This maintenance is carried out by the employees of the department. To facilitate control, the transport manager has asked that future statements should show vehicle maintenance costs analyzed into fixed and variable costs. Data from the six months from January to June inclusive are given below.

Vehicle maintenance cost Vehicle running hours

$ $

January 13,600 2,100

February 15,800 2,800

March 14,500 2,200

April 16,200 3,000

May 14,900 2,600

June 15,000 2,500

Required

Analyze the vehicle maintenance costs into fixed and variable costs, based on the data given, utilizing the least squares method. (20 marks)