Dukes Carriages is a delivery company which uses trucks. The company’s cost accountant has determined that if one of their trucks drives 115 000 km during a year, the semi variable operating cost is R 17 per km. If the same truck only drives 75 000 km during the year, the average semi-variable operating cost increases to R 20 per km. What would the total fixed cost per km equate to, when using the high-low method?Group of answer choicesA. R 646 875B. R 1 500 000C. R 1 955 000D. R 954 773

The high-low method is used to separate a mixed cost into its fixed and variable components. The formula for the method is:

Variable Cost = (Cost at High Activity Level - Cost at Low Activity Level) / (High Activity Level - Low Activity Level)

First, we need to calculate the total cost at the high and low activity levels:

High Activity Level Cost = 115,000 km * R 17/km = R 1,955,000 Low Activity Level Cost = 75,000 km * R 20/km = R 1,500,000

Next, we calculate the variable cost per km:

Variable Cost = (R 1,955,000 - R 1,500,000) / (115,000 km - 75,000 km) = R 9/km

Now, we can calculate the fixed cost by subtracting the total variable cost from the total cost at either the high or low activity level. Let's use the high activity level:

Fixed Cost = Total Cost - Total Variable Cost Fixed Cost = R 1,955,000 - (115,000 km * R 9/km) = R 1,955,000 - R 1,035,000 = R 920,000

However, the question asks for the fixed cost per km. To find this, we divide the total fixed cost by the number of km at the high activity level:

Fixed Cost per km = R 920,000 / 115,000 km = R 8/km

None of the answer choices match this calculation, so there may be a mistake in the question or the answer choices.