The management of East Coast Railroad Company introduced in Exercise

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:

The management of East Coast Railroad Company introduced in Exercise

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

The management of East Coast Railroad Company introduced in Exercise

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.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...

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