Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.58 per mile driven. Joyce has determined that if she drives 2,900 miles in a month, her total operating cost is $885. If she drives 5,200 miles in a month, her total operating cost is $1,230. Joyce has used the high-low method to determine that her monthly cost equation is total monthly cost = $450 + $0.15 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 5,400 miles.

3. Suppose Joyce took a week off and her sales for the month decreased by 22 percent. Using the degree of operating leverage, calculate the effect this will have on her profit for that month.