Answer:
Instructions are listed below.
Explanation:
Giving the following information:
She charges clients $2.60 per mile driven. She has determined that if she drives 2,500 miles in a month, her average operating cost is $2.40 per mile. If Bethany drives 5,000 miles in a month, her average operating cost is $2.00 per mile.
1) To calculate the variable and fixed cost, we need to use the following formulas:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (10,000 - 6,000) / (5,000 - 2,500)= $1.6
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 10,000 - (1.6*5,000)= $2,000
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 6,000 - (1.6*2,500)= $2,000
2) Income statement:
Sales= 2,750*2.6= 7,150
Variable cost= 2,750*1.6= (4,400)
Contribution margin= 2,750
Fixed costs= (2,000)
Net operating income= 750
