QUESTION: SPEEDY PARCEL SERVICE OPERATES A FLEET OF DELIVERY TRUCKS IN A LARGE METROPOLITAN AREA. A CAREFUL STUDY BY THE COMPANY'S COST ANALYST HAS DETERMINED THAT IF A TRUCK IS DRIVEN 96,000 MILES DURING A YEAR, THE AVERAGE OPERATING COST IS 10.3 CENTS PER MILE. IF A TRUCK IS DRIVEN ONLY 64,000 MILES DURING A YEAR, THE AVERAGE OPERATING COST INCREASES TO 11.5 CENTS PER MILE. REQUIRED: 1. USING THE HIGH-LOW METHOD, ESTIMATE THE VARIABLE AND FIXED COST ELEMENTS OF THE ANNUAL COST OF TRUCK OPERATION. 2. EXPRESS THE VARIABLE AND FIXED COSTS IN THE FORM Y= A + BX. 3. IF A TRUCK WERE DRIVEN 80,000 MILES DURING A YEAR, WHAT TOTAL COST WOULD YOU EXPECT TO BE INCURRED?

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