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6. The Hopkins Moving Company specializes in hauling heavy goods over long distances. The company's revenues and expenses depend on revenue miles, a measure that
6. The Hopkins Moving Company specializes in hauling heavy goods over long distances. The company's revenues and expenses depend on revenue miles, a measure that combines both weights and mileage. Summarized budget data for the next year are based on predicted total revenue miles of 800,000. Management is trying to decide how various possible conditions or decisions might affect pretax income. Compute the new pretax income for each of the following changes. Consider each case independently. Budgeted Data: Average selling price Average variable expenses Fixed Expenses, $120,000 $1.50 per revenue mile $ 1.30 per revenue mile Base Case: Compute the budgeted pretax income (base case) a. C. A 10% increase in revenue miles b. A 10% increase in sales price A 10% increase in variable expenses d. A 10% increase in fixed expenses e. An average decrease in selling price of $.03 per mile and a 5% increase in revenue miles (refer to the original data) f. An average increase in selling price of 5% and a 10% decrease in revenue miles g. A 10% increase in fixed expenses in the form of more advertising and a 5% increase in revenue miles r L h. Interpret the results of your analysis. Which options adversely impact the base case and which prove to be beneficial. Suggested: Prepare your sensitivity analysis using excel and these columns: Revenue Miles Sold Contribution Margin Per Revenue Mile Total Contribution Margin Fixed Expenses Net Income
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