## Answers

**Answer to question one**

**High-Low method**-

Particulars | Kilometers driven | Cost per Kilometer | Total Annual Cost |

(a) | (b) | (c) = (a) x (b) | |

High level of activity | 105,000.00 | 0.114 | 11,970.00 |

Low level of activity | 70,000.00 | 0.134 | 9,380.00 |

| | |

- Variable cost per kilometer = 2,590/35,000

= 0.074

- Fixed cost = Total cost less Variable cost

**Cost for 105,000 kilometers:**

Total cost = 11,970.00 (as mentioned in the above table)

Variable cost = 7,770.00 (105,000 Kilometers x 0.074)

Fixed Cost = 4,200.00 (11,970.00 – 7,770.00)

Therefore, the variable cost per kilometer is 0.074 and total fixed cost is 4,200.00.

- If a truck were driven 80,000 kilometers during a year, then total cost to be incurred:

- Total variable cost = 80,000 x 0.074

= 5,920.00

- Total fixed cost = 4,200.00 (as mentioned above)
- Total cost (a + b) = 5,920.00 + 4,200.00 = 10,120.00

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