et can contain viruses. Unless you need to edit, it's safer to stay in Protected View Enable Editing Case: Cost Structures for Global Shippers Inc. Management from Global Shippers Inc, an interational 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 B 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: Option A $100 Option B $100 Cost Information Delivery price (revenue) per shipment Variable cost per shipment delivered Contribution Margin per unit Fixed costs (annual) $85 $60 $15 $1,450,000 $40 $4,700,000 Management wants you to write a professional report, answering the following questions: Questions 1) What is the break-even point, in terms of volume (i.e., 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 $43,000 for an annual period? (3) How many shipments per month would have to be made under Option A to produce an annual operating margin equal to 11% of sales revenue? (4) How many shipments are required under Option B to produce net income of $213,000 per year, given a corporate tax rate of 25%? Bi e Case Analysis 1 - Protected View - Saved to this PC O Search Enable Editing yout References Mailings Review View Help Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. shipment Variable cost per shipment $85 delivered Contribution Margin per unit $15 Fixed costs (annual) $1,450,000 $60 $40 $4,700,000 Management wants you to write a professional report, answering the following questions: Questions 1) What is the break-even point, in terms of volume (i.e., 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 $43,000 for an annual period? (3) How many shipments per month would have to be made under Option A to produce an annual operating margin equal to 11% of sales revenue? (4) How many shipments are required under Option B to produce net income of $213,000 per year, given a corporate tax rate of 25%? (5) Assume that for the coming year total fixed costs are expected to decrease by 8% 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 35%. What volume (number of shipments) would be needed to generate net income of 8% 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)