In: Accounting
Variable Costing Income Statement for a Service Company
East Coast Railroad Company transports commodities among three routes (city-pairs): Atlanta/Baltimore, Baltimore/Pittsburgh, and Pittsburgh/Atlanta. Significant costs, their cost behavior, and activity rates for April are as follows:
Cost | Amount | Cost Behavior | Activity Rate | |||
Labor costs for loading and unloading railcars | $175,582 | Variable | $46.00 | per railcar | ||
Fuel costs | 460,226 | Variable | 12.40 | per train-mile | ||
Train crew labor costs | 267,228 | Variable | 7.20 | per train-mile | ||
Switchyard labor costs | 118,327 | Variable | 31.00 | per railcar | ||
Track and equipment depreciation | 194,400 | Fixed | ||||
Maintenance | 129,600 | Fixed | ||||
$1,345,363 |
Operating statistics from the management information system reveal the following for April:
Atlanta/ Baltimore |
Baltimore/ Pittsburgh |
Pittsburgh/ Atlanta |
Total | |||||
Number of train-miles | 12,835 | 10,200 | 14,080 | 37,115 | ||||
Number of railcars | 425 | 2,160 | 1,232 | 3,817 | ||||
Revenue per railcar | $600 | $275 | $440 |
a. Prepare a contribution margin by route report for East Coast Railroad Company for the month of April. Compute the contribution margin ratio. Rounded to one decimal place. If required, use the minus sign to indicate a negative contribution margin.
East Coast Railroad Company | ||||
Contribution Margin by Route | ||||
For the Month Ended April 30 | ||||
Atlanta/Baltimore | Baltimore/Pittsburgh | Pittsburgh/Atlanta | Total | |
Revenues | $ | $ | $ | $ |
Variable costs: | ||||
Labor costs for loading and unloading railcars | $ | $ | $ | $ |
Fuel costs | ||||
Train crew labor costs | ||||
Switchyard labor costs | ||||
Total variable costs | $ | $ | $ | $ |
Contribution margin | $ | $ | $ | $ |
Contribution margin ratio | % | % | % | %. |
Note:- Formulae Used | ||
Revenues | = | Number of Railcars * Revenue per Railcars |
Labor costs for loading and unloading railcars | = | Number of Railcars * Activity Rate of Labor costs for loading and unloading railcars i.e. $46 per rail cars |
Fuel costs | = | Number of train-miles * Activity Rate of fuel costs i.e. $12.40 per train-miles |
Train crew labor costs | = | Number of train-miles * Activity Rate of Train crew labor costs i.e. $7.20 per train-miles |
Labor costs for loading and unloading railcars + Fuel costs + Train crew labor costs + Switchyard labor costs | = | Number of railcars * Activity Rate of Switchyard labor costs i.e. $31 per rail cars |
Total variable costs | = | Labor costs for loading and unloading railcars + Fuel costs + Train crew labor costs + Switchyard labor costs |
Contribution margin | = | Revenues - Total variable costs |
Contribution margin ratio | = | Contribution margin / Revenues |