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Now your boss has asked you to look into several compensation proposals for the company drivers. Despite the fact that your boss is starting to get on your nerves with all of these demands, you figure you'd better perform well if you have any hope to be the controller in the foreseeable future. One of the major expenses for HZMT is driver salaries. The company has been paying drivers $5,200 per quarter. The average revenue generated per customer is $480 per shipment/trip. HZMT estimated that 20 shipments/trips would be contracted each quarter. Base your answers to the following questions on this information.

Required

Part I

Is the $5,200 a fixed, variable, or mixed cost?Compute the profit assuming there are 20 shipments.Compute the profit assuming a 10% decrease in shipments. What is the percentage change in profitability? Why is there a difference between the percent change in profitability and the percent change in shipments?What if instead that the drivers' union has proposed getting paid $360 per shipment. Assume the shipment fee remains at $600/shipment. Is the $360 per shipment a fixed, variable, or mixed cost? What is the total contribution margin?What is the per unit contribution margin?What is the breakeven point in units?What is the breakeven point in dollars?

What is the impact on the breakeven point (number of units) if management spends an additional $2,000 on an advertising program?

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