cvp analysis multiple cost drivers susan wong is a distributor 268754

CVP analysis, multiple cost drivers Susan Wong is a distributor of brass picture frames. For 2008, she plans to purchase frames for $30 each and sell them for $45 each. Susan’s fixed costs are expected to be $240,000. Susan’s only other costs will be variable costs of $60 per shipment for preparing the invoice and delivery documents, organizing the delivery, and following up for collecting accounts receivable. The $60 cost will be incurred each time Susan ships an order of picture frames, regardless of the number of frames in the order

1. a. Suppose Susan sells 40,000 picture frames in 1,000 shipments in 2008. Calculate Susan’s 2008 operating income.

b. Suppose Susan sells 40,000 picture frames in 800 shipments in 2008. Calculate Susan’s 2008 operating income.

2. Suppose Susan anticipates making 500 shipments in 2008. How many picture frames must Susan sell to break even in 2008?

3. Calculate another breakeven point for 2008, different from the one described in requirement 2. Explain briefly why Susan has multiple breakeven points.