Regina Star delivers flowers for several local flower stores. She charges clients $0.85 per mile driven. Regina has determined that if she drives 1,200 miles in a month, her average operating cost is $0.80 per mile. If she drives 2,000 miles in a month, her average operating cost is $0.60 per mile. Regina has used the high-low method (covered in Chapter 5) to determine that her monthly cost equation is: total cost = $600 + $0.30 per mile.

Required:

1. Determine how many miles Regina needs to drive to break even.

2. Assume Regina drove 900 miles last month. Without making any additional calculations, determine whether she earned a profit or a loss for the month.

3. If Regina wants to earn $800 a month, determine how many miles she must drive.

4. Prepare a contribution margin income statement assuming Regina drove 900 miles last month. Use this information to calculate Regina’s degree of operating leverage.