Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.55 per mile driven. Joyce has determined that if she drives 3,000 miles in a month, her total operating cost is $770. If she drives 5,100 miles in a month, her total operating cost is $1,043. Joyce has used the high-low method to determine that her monthly cost equation is total monthly cost = $380 + $0.13 per mile driven.

Required:

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

2. Calculate Joyces degree of operating leverage if she drives 5,300 miles.

3. Suppose Joyce took a week off and her sales for the month decreased by 30 percent. Using the degree of operating leverage, calculate the effect this will have on her profit for that month.

Determine how many miles Joyce needs to drive to break even. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.)

Break-Even Units

Miles

Calculate Joyces degree of operating leverage if she drives 5,300 miles. (Round your intermediate calculations to 2 decimal places and final answer to 4 decimal places.)

Degree of Operating Leverage

Suppose Joyce took a week off and her sales for the month decreased by 30 percent. Using the degree of operating leverage, calculate the effect this will have on her profit for that month. (Round your intermediate calculations and final answer to 4 decimal places. (i.e. .123456 should be entered as 12.3456%.))

Effect on Profit

%