Russell Preston delivers parts for several local auto parts stores. He charges clients 0.75 per mile driven. Russell has determined that if he drives 1,600 miles in a month, his average operating cost is $0.58 per mile. If he drives 4,900 miles in a month, his average operating cost is $0.36 per mile. Russell has used the high-low method to determine that his monthly cost equation is: total cost = $530.00 + $0.25 per mile.
Required:
1. Determine how many miles Russell needs to drive to break even.
2.Assume Russell drove 1,360 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month.
Loss
Profit
3.Determine how many miles Russell must drive to earn $1,075.00 in profit.
4-a.Prepare a contribution margin income statement assuming Russell drove 1,360 miles last month. (Enter your answers rounded to 2 decimal places.)
4-b. Use the above information to calculate Russell's degree of operating leverage. (Round your answer to the 2 decimal places.)