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 3,000 miles in a month, his average operating cost is $0.55 per mile. If he drives 4,000 miles in a month, his average operating cost is $0.50 per mile. Russell has used the high-low method to determine that his monthly cost equation is total cost = $600 + $0.35 per mile. Required:
1. Determine how many miles Russell needs to drive to break even k-Even Miles Miles.
2. Assume Russell drove 1,800 miles last month. Without making any additional calculations, determine whether he earned a profit or a loss last month.
3. Determine how many miles Russell must drive to earn $1,000 in profit.

Russell Preston

1. The miles Russell needs to drive to break even is:

= 1,500 miles.

2. If Russel drove 1,800 miles last month, he earned a profit.

3. To earn a profit of $1,000, the miles Russell must drive are:

= 4,000 miles

Explanation:

a) Data and Calculations:

Selling price per mile driven = $0.75

Average operating cost for driving 3,000 miles = $0.55 per mile

Total operating cost for 3,000 miles = $1,650 ($3,000 * $0.55)

Average operating cost for driving 4,000 miles = $0.50 per mile

Total operating for 4,000 miles = $2,000 (4,000 * $0.50)

Total cost function = $600 + $0.35 per mile using the high-low method

Variable cost per mile = $0.35

Fixed cost per month = $600

Contribution margin per mile = $0.40 ($0.75 - $0.35)

Contribution margin ratio = 0.5333

To break-even, Russel must drive = $600/$0.40 = 1,500 miles

At this mileage, his total costs = $1,125 ($600 + $0.35 * 1,500)

At this mileage, his total revenue = $1,125 ($0.75 * 1,500)

To earn a profit of $1,000, Russell must drive = ($600 + $1,000)/$0.40

= 4,000 miles

the u.s. census bureau produces data on the population and economy nationwide. it can you to analyze the kind of people living in your neighborhood. it does not show you the market of people willing to buy your product or an existing market for your product. that will require more market research. the census bureau only gives you an insight to the demographics in your area.

i guess you could put raise the economic balance