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Contribution Margin Reporting and AnalysisService Company East Coast Railroad Company transports commodities among three routes (city-pairs): Atlanta/Baltimore, Baltimore/Pittsburgh, and Pittsburgh/Atlanta. Significant costs, their cost behavior,
Contribution Margin Reporting and AnalysisService Company
East Coast Railroad Company transports commodities among three routes (city-pairs): Atlanta/Baltimore, Baltimore/Pittsburgh, and Pittsburgh/Atlanta. Significant costs, their cost behavior, and activity rates for April 2014, are as follows:
Cost Behavior Activity Rate Cost Amount Labor costs for loading and unloading railcars 175,582 Variable $46.00 per railcar Fuel costs Variable 12.40 per train-mile 460,226 267,228 7.20 per train-mile Train crew labor costs Variable Switchyard labor costs Variable 31.00 per railcar 118,327 Track and equipment depreciation 194,400 Fixed 129,600 Fixed Maintenance $1,345,363 Operating statistics from the management information system reveal the following for April: Atlanta/ Baltimore Pittsburgh Atlanta Baltimore Pittsburgh Total Number of train-miles 10,200 12,835 14,080 37,115 Number of railcars 425 2,160 1,232 3,817 Revenue per railcar $600 $275 $440 The management of East Coast Railroad Company improved the profitability of the Atlanta/Baltimore route in May by reducing the price of a railcar from $600 to $500. This price reduction increased the demand for rail services. Thus, the number of railcars increased by 275 railcars to a total of 700 railcars. This was accomplished by increasing the size of each train but not the number of trains. Thus, the number of train-miles was unchanged. All the activity rates remained unchangedStep by Step Solution
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