Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.

Question

Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0.64 per mile driven. Joyce has determined that if she drives 2,350 miles in a month, her total operating cost is $675. If she drives 3,450 miles in a month, her total operating cost is $939. Required 1. Using the high-low method, determine Joyce's variable and fixed operating cost components. (Round your cost per unit answer to 2 decimal places.) Variable Cost per Mile Driven Fixed Cost 2. Complete the contribution margin income statement for Joyce's service assuming she drove 1,500 miles last month. (Assume this falls within the relevant range of operations). JOYCE MURPHY Contribution Margin Income Statement For the Last Month Contribution Margin Net Operating Income

Explanation / Answer

1. Variable cost per mile driven = (939-675)/(3450-2350) = 0.24 per mile

Fixed cost = 939-(3450*.24) = $111

2) Contribution format income statment :

Sales (1500*.64) 960 Variable cost (1500*.24) 360 Contribution margin 600 FIxed cost 111 Net operating income 489

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