Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.54 per mile driven. Joyce has determined that if she drives 3,200 miles in a month, her total operating cost is $829. If she drives 5,900 miles in a month, her total operating cost is $1,153. Joyce has used the high-low method to determine that her monthly cost equation is total monthly cost = $445 $0.12 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 6,100 miles. 3. Suppose Joyce took a week off and her sales for the month decreased by 23 percent. Using the degree of operating leverage, calculate the effect this will have on her profit for that month
Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.54 per mile driven. Joyce has determined that if she drives 3,200 miles in a month, her total operating cost is $829. If she drives 5,900 miles in a month, her total operating cost is $1,153. Joyce has used the high-low method to determine that her monthly cost equation is total monthly cost = $445 $0.12 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 6,100 miles. 3. Suppose Joyce took a week off and her sales for the month decreased by 23 percent. Using the degree of operating leverage, calculate the effect this will have on her profit for that month
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 2CE
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