Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.42 per mile driven. Joyce has determined that if she drives 2,600 miles in a month, her total operating cost is $767. If she drives 4,500 miles in a month, her total operating cost is $995. Joyce has used the high-low method to determine that her monthly cost equation is total monthly cost = $455 + $0.12 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 4,700 miles.

3. Suppose Joyce took a week off and her sales for the month decreased by 28 percent. Using the degree of operating leverage, calculate the effect this will have on her profit for that month.