Question

Variable Costing Income Statement for a Service Company

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	$186,930		Variable		$46.50	per railcar
Fuel costs	399,040		Variable		11.60	per train-mile
Train crew labor costs	233,920		Variable		6.80	per train-mile
Switchyard labor costs	123,414		Variable		30.70	per railcar
Track and equipment depreciation	198,100		Fixed
Maintenance	132,100		Fixed

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

	Atlanta/ Baltimore		Baltimore/ Pittsburgh		Pittsburgh/ Atlanta		Total
Number of train-miles	12,080		9,520		12,800		34,400
Number of railcars	630		2,120		1,270		4,020
Revenue per railcar	$517		$248		$401

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

East Coast Railroad Company
Contribution Margin by Route
For the Month Ended April 30
	Atlanta/Baltimore	Baltimore/Pittsburgh	Pittsburgh/Atlanta	Total
Revenues	$	$	$	$
Variable costs:
Labor costs for loading and unloading railcars	$	$	$	$
Fuel costs
Train crew labor costs
Switchyard labor costs
Total variable costs	$	$	$	$
Contribution margin	$	$	$	$
Contribution margin ratio	%	%	%	%

Answer 1

East Coast Railroad Company
Contribution Margin by Route
For the Month Ended April 30
	Atlanta/Baltimore	Baltimore/Pittsburgh	Pittsburgh/Atlanta	Total
Revenues	325710	525760	509270	1360740
Variable costs:
Labor costs for loading and unloading railcars	29295	98580	59055	186930
Fuel costs	140128	110432	148480	399040
Train crew labor costs	82144	64736	87040	233920
Switchyard labor costs	19341	65084	38989	123414
Total variable costs	270908	338832	333564	943304
Contribution margin	54802	186928	175706	417436
Contribution margin ratio	16.8%	35.6%	34.5%	30.7%