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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
Transcribed Image Text: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
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