PLEASE ANSWER #5! thanks! Roadrunner Trucking Company is a nationwide truckload carrier. They operate in...
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PLEASE ANSWER #5! thanks!
Roadrunner Trucking Company is a nationwide truckload carrier. They operate in a highly-competitive market on a very thin margin. Below are the projected figures for 2016: Revenue per mile $5.00 Variable cost per mile $ 4.50 Projected fixed costs $5,000,000 Desired after tax profit $500,000 Tax rate 25%
1. Compute the contribution rate and computation rate margin.
2. Calculate the breakeven in miles and sales dollars based on the information from Question 1.
3. Management is reviewing a proposal from their liability insurance company. The proposal suggests the company change their premium from a fixed to a variable rate. If accepted, this would increase the variable costs by 25 cents per mile and drop the fixed costs by 2%. Should they make the change? Show calculations to support or answer.
4. Shareholders are pressuring management to increase after-tax profit and thus increase the amount of dividends that can be paid. Management thinks they can increase revenue per mile by 5% and with an aggressive cost-cutting program, which will reduce fixed costs by 10%. With this program they project after-tax profits would increase by 15%.
5. Compare the three alternatives. Which is best? Explain your answer.
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