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Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.60 per mile driven. Joyce has determined that if she drives 2,600 miles
Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.60 per mile driven. Joyce has determined that if she drives 2,600 miles in a month, her total operating cost is $738. If she drives 4,100 miles in a month, her total operating cost is $933. Joyce has used the high-low method to determine that her monthly cost equation is total monthly cost = $400 + $0.13 per mile driven. Required: 1. Determine how many miles Joyce needs to drive to break even. 2. Calculate Joyce's degree of operating leverage if she drives 4,300 miles. 3. Suppose Joyce took a week off and her sales for the month decreased by 25 percent. Using the degree of operating leverage, calculate the effect this will have on her profit for that month
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