6L-3

Russell Preston delivers parts for several local auto parts stores. He charges clients $0.90 per mile driven. Russell has determined that if he drives 3,400 miles in a month, his average operating cost is $0.70 per mile. If he drives 4,400 miles in a month, his average operating cost is $0.60 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost = $960 + $0.26 per mile. Required: 1. Determine how many miles Russell needs to drive to break even. 2. Assume Russell drove 1,750 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. 3. Determine how many miles Russell must drive to earn $1,600 in profit. 4-a. Prepare a contribution margin income statement assuming Russell drove 1,750 miles last month. 4-b. Use the information provided in Req 4a to calculate Russell's degree of operating leverage. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Reg 3 Req 4A Reg 4B Determine how many miles Russell needs to drive to break even. Break-Even Miles Miles Reg 1 Reg 2 Req3 Req 4A Reg 4B Assume Russell drove 1,750 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. O Profit Loss Req 1 Reg 2 Req3 Req 4A Req 4B Determine how many miles Russell must drive to earn $1,600.00 in profit. Target Miles Miles Reg 1 Req 2 Req3 Req 4A Req 4B Prepare a contribution margin income statement assuming Russell drove 1,750 miles last month. RUSSELL PRESTON Contribution Margin Income Statement For Last Month Contribution Margin Income from Operations Req 1 Reg 2 Req3 Req 4A Req 4B Use the information provided in Req 4a to calculate Russell's degree of operating leverage. (Round your answer to the 2 decimal places.) Degree of Operating Leverage