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Question

e http://erto mheducation." ?.cleCh5HW Joyce Murphy runs a courier service in downtown Seattle. She charges clients $0 62 per mile driven Joyce has determined that if she drives 2,450 miles in a month, her total operating cost is $725. If she drives 3,550 miles in a month, her total operating cost is $857 Required: 1. Using the high-low method, determine Joyce's variable and fixed operating cost components. (Round your cost per unit Variable Cost per Mile Driven Fixed Cost 2. Complete the contribution margin income statement for Joyce's service assuming she drove 1,600 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 References Book & Resources Financial Statements Learning Objective 05-03 Use the high-low method estimate cost behavior

Explanation / Answer

1) Variable cost per mile = (857-725)/(3550-2450) = 0.12 per mile

Fixed cost = 725-(2450*.12) = $431

2) Contribution format income statement :

Sales (1600*.62) 992 Variable cost (1600*.12) -192 Contribution margin 800 Fixed cost -431 Net operating income 369

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