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PA6-2 (Algo) Analyzing Break-Even Point, Setting Target Profit, Degree of Operating Leverage [LO 6-1, 6-2, 6-5] Russell Preston delivers parts for several local auto parts
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PA6-2 (Algo) Analyzing Break-Even Point, Setting Target Profit, Degree of Operating Leverage [LO 6-1, 6-2, 6-5] Russell Preston delivers parts for several local auto parts stores. He charges clients $0.75 per mile driven. Russell has determined that if he drives 2,000 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. Russell has used the high-low method to determine that his monthly cost equation is total cost = $600 +$0.45 per mile. Required: 1. Determine how many miles Russell needs to drive to break even. 2. Assume Russell drove 2,300 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. 3. Determine how many miles Russell must drive to earn $1,200 in profit. 4-a. Prepare a contribution margin income statement assuming Russell drove 2,300 miles last month. 4-b. Use the information provided in Req 4a to calculate Russell's degree of operating leverage. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Determine how many miles Russell needs to drive to break even. Break-Even Miles Miles Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Assume Russell drove 2,300 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. OProfit OLoss Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Determine how many miles Russell must drive to earn $1,200.00 in profit. Target Miles Miles Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Prepare a contribution margin income statement assuming Russell drove 2,300 miles last month. RUSSELL PRESTON Contribution Margin Income Statement For Last Month Contribution Margin Income from Operations Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Use the information provided in Req 4a to calculate Russell's degree of operating leverage. (Round your answer to the 2 decimal places.) Degree of Operating Leverage
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