Express Delivery is a rapidly growing delivery service. Last year, 80% of its revenue came from the delivery of mailing âpouchesâ 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 $13,350,000.
(a) What is the companyâs break-even point in total sales dollars? At the break-even point, how much of the companyâs 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 | $ |
Sale of mail pouches and small boxes | $ |
Sale of non-standard boxes | $ |
(b) The companyâs 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 companyâs 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 | $ |
Sale of mail pouches and small boxes | $ |
Sale of non-standardized boxes | $ |