Question

Rio Bus Tours has incurred the following bus maintenance costs during the recent tourist season. (The real is Brazil’s national monetary unit. On the day this exercise was written, the real was equivalent in value to .269 U.S. dollar.)

Month	Miles Traveled by Tour Buses		Cost
November	14,550		18,300		real
December	17,100		18,600
January	19,650		18,750
February	23,700		19,200
March	31,200		19,950
April	13,200		17,700

Required:

1. Use the high-low method to estimate the variable cost per tour mile traveled and the fixed cost per month.

2. Develop a formula to express the cost behavior exhibited by the company’s maintenance cost.

3. Predict the level of maintenance cost that would be incurred during a month when 41,000 tour miles are driven.

Answer 1