Jack Black delivers art supplies to art studios in the North east. He charges clients $0.75 per mile driven. Jack has determined that if he drives 3,000 miles in a month, his average operating cost is $0.55 per mile. If he drives 4,000 miles in a month, his average operating cost is $0.50 per mile. His monthly cost equation is total cost = $600 + $0.35 per mile.

Required:

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

2. Assume Russell drove 1,800 miles last month. Determine whether he earned a profit or a loss last month.

3. Determine how much revenue Russell must earn to make $1,000 in profit.

4-a. Prepare a contribution margin income statement assuming Russell drove 1,800 miles last month.

4-b. Use the above information to calculate Russells degree of operating leverage.