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Problem - Estimating Cost Behavior Using High-Low Method, Preparing Contribution Margin Income Statement
Bethany Link delivers parts for several local auto parts stores. She charges clients $0.75 per mile driven. She has determined that if she drives 2,100 miles in a month, her average operating cost is $0.55 per mile. If Bethany drives 4,200 miles in a month, her average operating cost is $0.40 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 2,400 miles. (Assume this falls within the relevant range of operations).
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