Express Delivery is a rapidly growing delivery service. Last year, 84% of its re
ID: 2394041 • Letter: E
Question
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.)
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Non Standardized Mail pouches & Boxes New sales mix %X 63% 37% Contribution Margin Ratio 0.63 0.13 0.3969 0.0481 Weighted Contibution Margin Ratio 0.445 (0.3969+0.0481) Total break even saless in $ (13590000/0.445) $30539325.84 Sale of mail pouches and small boxes in $ (30539325.84*37%) $11299550.56 Sale of non-standardized boxes in $ (30539325.84*63%) $19239775.28Related Questions
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