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 2,000 miles in a month, his average operating cost is $0.50 per mile. If he drives 3,000 miles in a month, his average operating cost is $0.45 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost = $1,155 + $0.35 per mile.

Required:

4-a. Prepare a contribution margin income statement assuming Russell drove 2,600 miles last month.

4-b. Use the information provided in Req 4a to calculate Russells degree of operating leverage.