Inc is a delivery service specialing in small parcels envelopes and packages. The owner is currently the choice tento different cost structures for a planned increase in the business operations. Option one is to buy 200 vehicles and forevery person to the packages Option two is to hire delivery personnel who would use the own vehicles for deliveries. The delivery persone in this car would be compensated for their time and for the use of their vehicles Item Option 1 Option 2 (AAS'Scarsi Driver's cars Price per delivery $60 560 Variable cost per delivery $20 548 Fixed costs per year $2.740.000 5618.000 Required: (Treat each question independently. Show supporting calculations to obtain credit 1. (4 points) What is the breakeven point in number of deliveries per year for each option? 2. (4 points) What is the number of deliveries per year that would make the owner indifferent between Option 1 and Option 2? 3. (4 points) How many deliveries would have to be made under Option 2 (drivers use their cars) to generate a pre-tax profit equal to 10 percent of sales revenue? 4. (4 points) Assume an effective income tax rate of 40 percent. If the owner selects Option 1 and determines that the firm must earn an after-tax profit of $54,000, what should be the price per delivery if the number of deliveries per year is expected to be 65,000? AAG Service Inces a delivery service special in all porcekerlopes and packages. The current de cette different cost structures for a planned increase in the business operation Options to buy 700 wandere de perto de packages. Option two is to hire delivery personnel who would use the vehicles for deliveries. The delivery person we compensated for the time and for the use of their vehicles Item Option 1 Option 2 LAAG cars (Driver's cars Price per delivery soa 560 Variable cost per delivery $20 548 Fixed costs per year $2.740.000 5611,000 Required: (Treat each question independently. Show supporting calculations to obtain credit) 1. (4 points) What is the breakeven point in number of deliveries per year for each option? 2. (4 points) What is the number of deliveries per year that would make the owner indifferent between Option 1 and Option 2? 3. (4 points) How many deliveries would have to be made under Option 2 (drivers use their cars) to generate a pre-tax profit equal to 10 percent of sales revenue? 4.64 points) Assume an effective income tax rate of 40 percent. If the owner selects Option 1 and determines that the firm must earn an alter-tax profit of $54,000, what should be the price per delivery if the number of deliveries per year is expected to be 65,000
