Russell Preston delivers parts for several local auto parts stores. He charges clients $0.75 per mile driven. Russell has determined that if he drives 3,480 miles in a month, his average operating cost is $0.55 per mile. If he drives 4,640 miles in a month, his average operating cost is $0.50 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost = $696+ $0.35 per mile. Required: 1. Determine how many miles Russell needs to drive to break even. 2. Assume Russell drove 2,040 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. 3. Determine how many miles Russell must drive to earn $1,000 in profit. 4. a. Prepare a contribution margin income statement assuming Russell drove 2,040 miles last month. b. Use the information provided in Req 4a to calculate Russell's degree of operating leverage. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Assume Russell drove 2,040 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. Note: Do not round your intermediate calculations. Determine whether he earned a profit or a loss last month. < Req 1 Req 3 >
Russell Preston delivers parts for several local auto parts stores. He charges clients $0.75 per mile driven. Russell has determined that if he drives 3,480 miles in a month, his average operating cost is $0.55 per mile. If he drives 4,640 miles in a month, his average operating cost is $0.50 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost = $696+ $0.35 per mile. Required: 1. Determine how many miles Russell needs to drive to break even. 2. Assume Russell drove 2,040 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. 3. Determine how many miles Russell must drive to earn $1,000 in profit. 4. a. Prepare a contribution margin income statement assuming Russell drove 2,040 miles last month. b. Use the information provided in Req 4a to calculate Russell's degree of operating leverage. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Assume Russell drove 2,040 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month. Note: Do not round your intermediate calculations. Determine whether he earned a profit or a loss last month. < Req 1 Req 3 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Russell Preston delivers parts for several local auto parts stores. He charges clients $0.75 per mile driven. Russell has determined that
if he drives 3,480 miles in a month, his average operating cost is $0.55 per mile. If he drives 4,640 miles in a month, his average
operating cost is $0.50 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost =
$696 + $0.35 per mile.
Required:
1. Determine how many miles Russell needs to drive to break even.
2. Assume Russell drove 2,040 miles last month. Without making any additional calculations, determine whether he earned a profit or
a loss last month.
3. Determine how many miles Russell must drive to earn $1,000 in profit.
4. a. Prepare a contribution margin income statement assuming Russell drove 2,040 miles last month.
b. Use the information provided in Req 4a to calculate Russell's degree of operating leverage.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Req 3
Req 4A
Req 4B
Assume Russell drove 2,040 miles last month. Without making any additional calculations, determine whether he earned a
profit or a loss last month.
Note: Do not round your intermediate calculations.
Determine whether he earned a profit or a loss last month.
< Req 1
Req 3 >
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