Express Delivery is a rapidly growing delivery service Last

Express Delivery is a rapidly growing delivery service. Last year, 84% of its revenue came from the delivery of mailing “pouches” and small, standardized delivery boxes (which provides a 13% contribution margin). The other 16% of its revenue came from delivering non-standardized boxes (which provides a 63% 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 $13,590,000.

(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.)

(b) The company’s management would like to hold its fixed costs constant, but shift its sales mix so that 63% 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.)

Solution

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