Question

Express Delivery is a rapidly growing delivery service. Last year, 80% of its revenue came from the delivery of mailing “pouches” and small, standardized delivery boxes (which provides a 20% contribution margin). The other 20% of its revenue came from delivering non-standardized boxes (which provides a 70% contribution margin). With the rapid growth of Internet retail sales, Express believes that there are great opportunities for growth in the delivery of non-standardized boxes. The company has fixed costs of $13,368,000.

(a) What is the company’s break-even point in total sales dollars? At the break-even point, how much of the company’s sales are provided by each type of service? (Use Weighted-Average Contribution Margin Ratio rounded to 4 decimal places e.g. 0.2552 and round final answers to 0 decimal places, e.g. 2,510.)

Total break-even sales		$enter a dollar amount rounded to 0 decimal places
Sale of mail pouches and small boxes		$enter a dollar amount rounded to 0 decimal places
Sale of non-standard boxes		$enter a dollar amount rounded to 0 decimal places

(b) The company’s management would like to hold its fixed costs constant but shift its sales mix so that 60% of its revenue comes from the delivery of non-standardized boxes and the remainder from pouches and small boxes. If this were to occur, what would be the company’s break-even sales, and what amount of sales would be provided by each service type? (Use Weighted-Average Contribution Margin Ratio rounded to 4 decimal places e.g. 0.2552 and round final answers to 0 decimal places, e.g. 2,510.)

Total break-even sales		$enter a dollar amount rounded to 0 decimal places
Sale of mail pouches and small boxes		$enter a dollar amount rounded to 0 decimal places
Sale of non-standardized boxes		$enter a dollar amount rounded to 0 decimal places

Answer 1

Date: 1 Dater. Il Page No: Page 0 Page No.: Weighted average contribution morgin ratio = 20 x 80% +70 x 20% . = 30% Fixed cost $ 13368000 Break-even sales = fixed wit contribution morgin ratio = $13368000 = $44560000 sale of mail pouches and small boxes - $44560000 x 80% = 356480004 Sale of non standard boxes = $44560000 x 20% = $ 8912000

Page ③ Date:_II__Page no:_ Weighted average contribut on morgin ratio = TO x 60% + 20 x 40% = 50% fixed cost = $13368000 Breakeve sales = = $26736000 $13368000 50% sale of mail pouches and small boxes = $26736000 ! x 40% = $ 10694400 sale of non standardized boxes & $26736000 x 60% & $ 16041600