-Your answer IS Incorrect. Iry again Express Delivery is a rapidly growing deliv
ID: 2569455 • Letter: #
Question
-Your answer IS Incorrect. Iry again 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 $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 4,000,000 Sale of mail pouches and small boxes 3,200,000 Sale of non-standard boxes 800,000 (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 2,400,000 Sale of mail pouches and small boxes 960,000 Sale of non-standardized boxes 1,440,000Explanation / Answer
a) Weighted average contribution margin = (80%*20%+70%*20%) = 30%
Total break even sales = Fixed cost/Contribution margin ratio
= 12120000/.30
Total break even sales = 40400000
Sale of mail pouches and small boxes = (40400000*80%) = 32320000
Sale of non standard boxes = (40400000*20%) = 8080000
b) Weighted average contribution margin = (60%*70%+40%*20%) = 50%
Total break even sales = Fixed cost/Contribution margin ratio
= 12120000/.50
Total break even sales = 24240000
Sale of mail pouches and small boxes = (24240000*40%) = 9696000
Sale of non standardixed boxes = (24240000*60%) = 14544000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.