East Coast Railroad Company transports commodities among three routes (city-pair
ID: 2567731 • Letter: E
Question
East Coast Railroad Company transports commodities among three routes (city-pairs): Atlanta/Baltimore, Baltimore/Pittsburgh, and Pittsburgh/Atlanta. Significant costs, their cost behavior, and activity rates for April are as follows:
Operating statistics from the management information system reveal the following for April:
The management of East Coast Railroad Company improved the profitability of the Atlanta/Baltimore route in May by reducing the price of a railcar from $600 to $500. This price reduction increased the demand for rail services. Thus, the number of railcars increased by 275 railcars to a total of 700 railcars. This was accomplished by increasing the size of each train but not the number of trains. Thus, the number of train-miles was unchanged. All the activity rates remained unchanged.
Labels and Amount Descriptions
Contribution Margin by Route
A. Prepare a contribution margin report for the Atlanta/Baltimore route for May. Calculate the contribution margin ratio in percentage terms to one decimal place. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
East Coast Railroad Company
Contribution Margin for Atlanta/Baltimore Route
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Contribution Margin Analysis
B. Prepare a contribution margin analysis to evaluate management’s actions in May. Assume that the May planned quantity, price, and unit cost was the same as April. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If an amount is zero, enter "0".
East Coast Railroad Company
Contribution Margin Analysis - Atlanta/Baltimore Route
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$(29,291.00)
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Please show the work! Thank you!
Cost Amount Cost Behavior Activity Rate Labor costs for loading and unloading railcars $175,582 Variable $46.00 per railcar Fuel costs 460,226 Variable 12.40 per train-mile Train crew labor costs 267,228 Variable 7.20 per train-mile Switchyard labor costs 118,327 Variable 31.00 per railcar Track and equipment depreciation 194,400 Fixed Maintenance 129,600 Fixed $1,345,363Explanation / Answer
A) East Coast Railroad Company
Contribution Margin - Atlanta/Baltimore Route for May (Amount in $)
B) Contribution Margin Analysis (Amount in $)
As it can be shown from the above table that there is a net increase in contribution of $73,825 due to Managemeny's Action in May from the last month.
1) Revenue ($500*700 railcars) 350,000 2) Labour Costs for loading and unloading railcars (700*$46) 32,200 3) Fuel costs (12,835 train miles*$12.40) 159,154 4) Train Crew Labor Costs (12,835 train miles*$7.2) 92,412 5) Switchyard Labor Costs (700 railcars*$31) 21,700 6) Total Variable Costs (2+3+4+5) 305,466 7) Contribution (1-6) 44,534 8) Contribution Margin (%) (7/1)*100 12.7%Related Questions
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