Question

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
Total Amount	$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

Instructions

1. Prepare a contribution margin by route report for East Coast Railroad Company for the month of April. Compute the contribution margin ratio in whole percents, rounded to one decimal place.

2. Discuss the route performance of the railroad using the above report.

Note: add citations when necessary.

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
Total Amount	$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

Instructions

1. Prepare a contribution margin by route report for East Coast Railroad Company for the month of April. Compute the contribution margin ratio in whole percents, rounded to one decimal place.

2. Discuss the route performance of the railroad using the above report.

Answer 1

	I	East Coast Railroad Company
		Contribution Income Statement
			Atlanta/Baltimore	Baltimore/Pittsburgh	Pittsburgh/Atlanta	Total
		Number of rail cars-numbers	425	2,160	1,232
		Revenue Per rail car	600	275	440
		Revenue	255,000	594,000	542,080	1,391,080
		Less:Variable Cost ***	(284,291)	(366,240)	(370,832)	(1,021,363)
		Contribution Margin	(29,291)	227,760	171,248	369,717
		Contribution Margin ratio	(10.3)	62.2	46.2	36.2
		Less: Fixed Cost
		Track and equipment depreciation				(194,400)
		Maintenance				(129,600)
		Net Profit(Contribution margin less Fixed Cost)			45,717
		***
		Variable Cost
			Cost Pool	Activity Rate	Cost Driver	Atlanta/Baltimore	Baltimore/Pittsburgh	Pittsburgh/Atlanta
		Labor costs for loading and unloading railcars	175,582	46.00	Rail Car	19,550	99,360	56,672
		Fuel costs	460,226	12.40	Train Mile	159,154	126,480	174,592
		Train crew labor costs	267,228	7.20	Train Mile	92,412	73,440	101,376
		Switchyard labor costs	118,327	31.00	Rail Car	13,175	66,960	38,192
			1,021,363			284,291	366,240	370,832
			Atlanta/Baltimore	Baltimore/Pittsburgh	Pittsburgh/Atlanta
		Number of rail cars-numbers	425	2,160	1,232
		Number of Train miles	12,835	10,200	14,080
	II	Performance of East Coast railroad company is good as it is making profit of $45,717/-