Answered step by step
Verified Expert Solution
Question
1 Approved Answer
PA6-2 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.
PA6-2 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 0.90 per mile driven. Russell has determined that if he drives 2,100 miles in a month, his average operating cost is $0.60 per mile. If he drives 4,100 miles in a month, his average operating cost is $0.40 per mile. Russell has used the high-low method to determine that his monthly cost equation is: total cost = $1,420.00 + $0.19 per mile. Required: 1. Determine how many miles Russell needs to drive to break even. Break-Even Miles Miles 2. Assume Russell drove 2,500 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. O Profit O Loss 3. Determine how many miles Russell must drive to earn $1,420.00 in profit. Target Miles - Miles | 4-a. Prepare a contribution margin income statement assuming Russell drove 2,500 miles last month. (Enter your answers rounded to 2 decimal places.) RUSSELL PRESTON Contribution Margin Income Statement For Last Month Contribution Margin Income from Operations 4-b. Use the above information to calculate Russell's degree of operating leverage. (Round your answer to the 2 decimal places.) Degree of Operating Leverage
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started