The management of East Coast Railroad Company introduced in Exercise improved the profitability of the Atlanta/ Baltimore route in May by reducing the price of a railcar from $ 600 to $ 500. This price reduction increased the demand for rail services. Thus, the number of railcars increased by 275 railcars to a total of 700 railcars. This was accomplished by increasing the size of each train but not the number of trains. Thus, the number of train-miles was unchanged. All the activity rates remained unchanged.
In Exercise 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 2014, are as follows:

Operating statistics from the management information system reveal the following for April:

a. Prepare a contribution margin report for the Atlanta/ Baltimore route for May. Calculate the contribution margin ratio in percentage terms to one decimal place.
b. Prepare a contribution margin analysis to evaluate management’s actions in May. Assume that the May planned quantity, price, and unit cost was the same asApril.

  • CreatedJune 27, 2014
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