Question
Tom Anderson tour company organizes East Coast tours for tourists using luxury buses. The following information about the operating costs of the tour buses are
Tom Anderson tour company organizes East Coast tours for tourists using luxury buses. The following information about the operating costs of the tour buses are provided below for part of the last fiscal year. Month Miles traveled by Tour buses Operating cost for tour buses July 7,925 $9,090 August 17,950 $11,800 September 18,350 $10,350 October 15,000 $11,000 November 18,400 $10,222 December 7,800 $9,374 Required: a) Use the high-low method to estimate the cost function for monthly operating cost for tour buses. b) Use the above cost function to predict the operating costs for the next fiscal year. The expected miles traveled for next year equals 150,000 miles c) How will your answer to part (b) change if the management is expecting the following changes in costs for next fiscal year? Annual fixed costs are expected to increase by 10.00% Variable costs are expected to increase by 5.00%
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