Bethany Link delivers parts for several local auto parts stores. She charges cli

Question

Bethany Link delivers parts for several local auto parts stores. She charges clients $3.28 per mile driven. She has determined that if she drives 2,700 miles in a month, her average operating cost is $3.08 per mile. If Bethany drives 5,400 miles in a month, her average operating cost is $2.20 per mile. asms ina mon he averae mon er Required 1. Using he high ow method, determine Bethany's variable and ed opera na cost components. ound your cost pe unit answer to 2d ima piac Variable Cost per Mile Driven Fixed Cost 2. Complete the contribution margin income statement for the business last month, when Bethany drove 2,970 miles. (Assume this falls within the relevant range of operations) Round your intermediate calculations to 2 decimal places and final answers to the nearest whole number.) BETHANY LINK Contribution Margin Income Statement For the Last Month Contribution Margin Net Operating Income

Explanation / Answer

Total cost on 2700 Miles = 2700*3.08 = 8316

Total cost on 5400 Miles = 5400*2.20 = 11880

a) Variable cost per mile = (11880-8316)/(5400-2700) = 1.32 per mile

FIxed cost = 11880-(5400*1.32) = $4752

b) Contribution format income statement

Sales (2970*3.28) 9741.60 Variable cost (2970*1.32) 3920.40 Contrbution margin 5821.20 Fixed cost 4752 Net operating income 1069.20

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