Reference no: EM135634

Q:

Barkins Moving Company specializes in hauling heavy goods over extended distances. The company's expenses and revenues depend on revenue miles, a measure that combines both weights and mileage. Summarize budget data for the next year is based on forecast total revenue miles of 800,000. At that level of volume, and at any level of volume in between 700,000 and 900,000 revenue miles, the company's fixed costs are $120,000. The variable costs and selling price are:

Per revenue mile

Average selling price (revenue) $1.50

Average variable expense $1.30

1. Evaluate the budgeted net income. Ignore income taxes.

2. Management is trying to decide how several possible conditions or decisions might affect net income. Evaluate the new net income for each of the subsequent changes. Consider each case independently.

-a. A 10 percent increase in sales price

-b. A 10 percent increase in revenue miles

-c. A 10 percent increase in variable cost

-d. A 10 percent increase in fixed cost

-e. An average decrease in selling price of 3 percent per revenue mile and a 5 percent increase in revenue miles.

-f. An average gain in selling price of 5% and a 10% decrease in revenue miles.

-g. A 10% increase in fixed expenses in the form of more advertising and a 5% increase in revenue miles.