Cory Bryant runs a courier service in downtown Phoenix. He charges clients $0.50 per mile driven. Cory has determined that if he drives 3,000 miles in a month, his total operating cost is $875. If he drives 4,000 miles in a month, his total operating cost is $1,025.

Required:

1. Using the highdow method, determine Cory’s variable and fixed operating cost components. Show this as a linear formula (Y = A + BX).

2. Prepare a contribution margin income statement for Cory’s service assuming he drove 2,400 miles last month.