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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)

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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) $85 $60 $15 $1,200,000 $40 $4,500,000 (1) 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? (2) Which option do you think is the more profitable one for this business? Explain. (3) Which option do you consider to be biskier to the business? Explain (calculate degree of operating leverage to help answer this question)

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