Problem:
Mainline moving company specializes in hauling heave foods over long distances. The company's revenues and expenses depend on revenue miles, a measure that combines both weights and mileage. The summarized budget data for next year are based on predicted total revenue miles of 800,000. At that level of volume, and at any level of volume between 700,000 and 900,0000 revenue miles, the company's fixed costs are $110,000. The selling price and variable costs are:
Per Revenue Mile
Average selling price (revenue) $1.50
Average variable expenses 1.30
1. Compute the budgeted net income. Ignor income taxed
2. Management is trying to decide hor various possible conditions or decisions might affect net income. Compute the new net income for each of the following changes. Consider each case independantly.
a. A 10% increase in sales price
b. a 10% increase in revenue miles
c. a 10% increase in variable expenses
d. a 10 percent increase in fixed expenses
e An average decrease in selling price of $.03 per revenue mile and a 5% increase in revenue miles. Refer to the original data.
f. An Average increase in selling price of $.05 and 100% decrease in revenue miles.
g. A 10% increase in fixed expenses in the form of more advertising and a 5 % increase in revenue miles.