Question

Bethany Link delivers parts for several local auto parts stores. She charges clients $3.44 per mile driven. She has determined that if she drives 2,300 miles in a month, her average operating cost is $3.24 per mile. If Bethany drives 4,600 miles in a month, her average operating cost is $1.80 per mile. Required: 1. Using the high-low method, determine Bethany's variable and fixed operating cost components. 2. Complete the contribution margin income statement for the business last month, when Bethany drove 2,530 miles. (Assume this falls within the relevant range of operations) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using the high-low method, determine Bethany's variable and fixed operating cost components. (Round your cost per unit answer to 2 decimal places.) Variable Cost per Mile Driven Fixed Cost Required 1 > Required 2

Answer 1

Total cost for 2300 miles	7452	=2300*3.24
Total cost for 4600 miles	8280	=4600*1.80
1
Variable cost per mile driven	0.36	=(8280-7452)/(4600-2300)
Fixed cost	6624	=7452-(2300*0.36)
2
Contribution margin Income statement
Sales revenue	8703	=2530*3.44
Variable costs	911	=2530*0.36
Contribution margin	7792
Fixed costs	6624
Net Operating income	1168