Cory Bryant runs a courier service in downtown Phoenix. He charges clients $0.50 per mile driven. Cory has determined that if he drives 2,700 miles in a month, his total operating cost is $931. If he drives 5,900 miles in a month, his total operating cost is $1,507. Cory has used the high-low method to determine that his monthly cost equation is: Total Monthly Cost = $445 + $0.18 per Mile Driven.
1: Determine how many miles Cory needs to drive to break even. (Round your intermediate calculations to 2 decimal places and final answer to next whole number.)
Break-even units:_______miles
2: Calculate Cory's degree of operating leverage if he drives 6,100 miles. (Round your intermediate calculations to 2 decimal places and final answer to 4 decimal places.)
Degree of operating leverage:_______
3: Suppose Cory took a week off and his sales for the month decreased by 23 percent. Using the degree of operating leverage, calculate the effect this will have on his profit for that month. (Round your intermediate calculations and final answer to 4 decimal places. Omit the "%" sign in your response.)
Effect on profit:_______%