Case: Cost Structures for Global Shippers Inc. Management from Global Shippers Inc, an international shipping business, is in the process of assessing the choice between two different cost structures for the business. Option A has relatively higher variable costs per unit shipped but lower annual fixed costs, while Option has the opposite-relatively lower variable costs in its cost structure but higher fixed costs. Assume that delivery selling prices per unit are constant. The table below contains critical information in making the decision Cost Information Option A Option B $100 $100 Delivery price (revenue) per shipment Variable cost per shipment delivered $85 $60 Contribution Margin per unit $15 $40 Fixed costs (annual) $1,200,000 $4,500,000 Management wants you to write a professional report, answering the following questions: Questions 1) What is the break even point, in terms of volume (le, number of shipments per year for Option A? Option B? (2) How many shipments would have to be made under Option A to produce operating income of $30,000 for an annual period? (3) How many shipments per year would have to be made under Option A to produce an operating margin equal to 9% of sales revenue? (4) How many shipments are required under Option to produce net income of $180,000 per year, given a corporate tax rate of 40%? (5) Assume that for the coming year total fixed costs are expected to increase by 15% for each of the two options. What is the new break-even point in terms of number of shipments for each option By what percentage did the break-even point change for each case? How do these figures compare to the percentage increase in budgeted fixed costs? (6) Assume an average income tax rate of 20%. What volume number of shipments) would be needed to generate net income of 5% of revenue for each option? (7) Which option do you think is the more profitable one for this business? Explain. (8) Which option do you consider to be more risky to the business? Explain (calculate degree of operating leverage to help answer this question). Case: Cost Structures for Global Shippers Inc. Management from Global Shippers Inc an international shipping business, is in the process of assessing the choice between two different cost structures for the business Option has relatively higher variable costs per unit shipped but lower annual fixed costs, while Option has the opposite-relatively lower warble costsins cost structure but higher fixed costs. Assume that delivery selling prices per unit are constant. The table below contains critical information in making the decision Option A Option B $100 $100 Cost Information Delivery price (revenue) per shipment Variable cost per shipment delivered Contribution Margin per unit Fixed costs (annual) 585 560 $15 $40 $1,200,000 $4,500,000 Management wants you to write a professional report answering the following questions Questions 1) What is the break-even point, in terms of volume e number of shipments per year for Option A? Option ? 2) How many shipments would have to be made under Option A to produce operating income of $30.000 for an annual period? (3) How many shipments per year would have to be made under Option to produce an operating margin equal to of sales revenue? (4) How many shipments are required under Option to produce net income of $180.000 per year. given a corporate tax rate of 4047 (5) Assume that for the coming year total fixed costs are expected to increase by 15% for each of the two options. What is the new break even point in terms of number of shipments for each opcion) By what percentage did the break-even point change for each case? How do these figures compare to the percentage increase in budgeted feed costs (6) Assume an average income tax rate of 20 What volume number of shipments) would be needed to generate net income of 5 of revenue for each option) (7) Which option do you think is the more profitable one for this business? Explain 18) Which option do you consider to be more risky to the business? Explain (calculate degree of operating leverage to help answer this question Evaluation