Marggrette runs a courier service in downtown Seattle. She charges clients $0.60 per mile driven....
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Accounting
Marggrette runs a courier service in downtown Seattle. She charges clients $0.60 per mile driven. Marggrette has determined that if she drives 3,200 miles in a month, her total operating cost is $1,045. If she drives 5,400 miles in a month, her total operating cost is $1,485. Joyce has used the high-low method to determine that her monthly cost equation is total monthly cost = $405 + $0.20 per mile driven.
Required:
- Determine how many miles Marggrette needs to drive to break even.
- Calculate Marggrette's degree of operating leverage if she drives 5,600 miles.
- Suppose Marggrette 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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