Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.59 per mile driven. Joyce has determined that if she drives 2,700 miles in a month, her total operating cost is $812. If she drives 5,100 miles in a month, her total operating cost is $1,196. Joyce has used the high-low method to determine that her monthly cost equation is total monthly cost $380 + $0.16 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 5,300 miles. 3. Suppose Joyce took a week off and her sales for the month decreased by 24 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 $0.59 per mile driven. Joyce has determined that if she drives 2,700 miles in a month, her total operating cost is $812. If she drives 5,100 miles in a month, her total operating cost is $1,196. Joyce has used the high-low method to determine that her monthly cost equation is total monthly cost $380 + $0.16 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 5,300 miles. 3. Suppose Joyce took a week off and her sales for the month decreased by 24 percent. Using the degree of operating leverage, calculate the effect this will have on her profit for that month.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 5EB: Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90....

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