Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 156,000 kilometers during a year, the average operating cost is 12.6 cents per kilometer. If a truck is driven only 104,000 kilometers during a year, the average operating cost increases to 15.6 cents per kilometer. Required:
a. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation.
b. Express the variable and fixed costs in the form Y = a + bX.
c. If a truck were driven 130,000 kilometers during a year, what total cost would you expect to be incurred?