Exercise 19-8 delivery service. Last year, 80% of its revenue came from the deli

Question

Exercise 19-8 delivery service. Last year, 80% of its revenue came from the delivery of mailing pouches and small, standardized delivery boxes which provides Express Delivery is a rapidly growing a 20% contribution margin). The other 20% of its revenue came from delivering non-standardized boxes which provides a 709 contribution margin . With the rapid grow th of ternet retail sales, Express believes that there are great opportunities for growth in the delivery of non-standardized boxes. The company has fixed costs of $12,120,000. (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 Sale of mail pouches and small boxes Sale of non-standard boxes (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 O decimal places, e.g. 2,510.) Total break-even sales Sale of mail pouches and small boxes s Sale of non-standardized boxes

Explanation / Answer

ReqA: Sales Mix: Delivery in Standardized boxes = 80% of revenue (CM ratio is 20%) Deliveryin Non Standardized boxes = 20% of revenue(CM ratio is 70%) Therefore, Combined CM ratio for the compant as whole = (80% of 20+ 20% of 70 ) = 30% of total revenue Fixed cost = $ 12,120,000 Now, Break even point in $ = Total fixed cost / CM ratio of company                              ( 12,120,000 /30 *100) = $ 40,400,000 Revenue from Standardized boxes at break even = (40400,000 *80%)= $32320,000 Revenue from Non Standardized boxes at break even =(40400,000*20%) = $ 8080,000 Req B: Revise sales mix Delivery in Standardized boxes = 40% of revenue (CM ratio is 20%) Deliveryin Non Standardized boxes = 60% of revenue(CM ratio is 70%) Therefore, Combined CM ratio for the compant as whole = (40% of 20+ 60% of 70 ) = 50% of total revenue Fixed cost = $ 12,120,000 Now, Break even point in $ = Total fixed cost / CM ratio of company                              ( 12,120,000 /50 *100) = $ 24,240,000 Revenue from Standardized boxes at break even = (24240,000 *40%)= $ 9696,000 Revenue from Non Standardized boxes at break even =(24240,000*60%) = $ 14544,000

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