How will the 3.9% increase in FedEx Freight shipping rates impact the breakeven point for an Etsy jewelry artist?

FedEx-typewriter-braceletFedEx Corp announced that it would be raising its shipping rates by an average of 3.9% on March 31, 2014.  The rate change applies to FedEx Freight shipments within and between the United States, Canada, and Mexico.

The FedEx Freight segment is a provider of less-than-truckload (LTL) freight services, which is the shipping of relatively small loads of freight.  Customers will use the LTL method of shipping because it is less expensive than hiring an entire truck for a smaller shipment.

JoySparksDesigns makes bracelets and other jewelry from vintage typewriter keys and offers the pieces for sale on Etsy.

Question

Assume that JoySparksDesigns uses FedEx Freight for its inbound shipments of the raw materials used in making its jewelry.  Will the rate increase cause JoySparksDesigns’ breakeven point to increase, decrease, or stay the same, assuming that JoySparksDesigns increases its selling price by 3.9%?  Support your answer with hypothetical calculations.

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below.  Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.  The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)
  • YouTube video (narrated article in shareable YouTube link)

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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