Exercise 19-8 Express Delivery is a rapidly growing delivery service. Last year,
ID: 2580375 • Letter: E
Question
Exercise 19-8 Express Delivery is a rapidly growing delivery service. Last year, 80% ofits revenue car e rom the delivery o maling pouches and sma standardize de ver, ues whic, prov des a %, cont bution margin) The other 20% ofits revenue came ro deliver ng non standardized boxes which provides a 70 contribution margin with the rapid o t o te et retail sales, Exp be eves at here are great opportunities for growth in the delivery of non-standardized boxes. The company has fixed costs of $12,238,000. (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 boxess Sale of non-standard boxes (b The company's management would like to hold its xed costs constant but shift ts sales m x so that 60% of its revenue comes from ede ver o non standard ze o es and th remainder om 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 0.25and round final answers to 0 dcimal places, e.g. 2,50.) I break-even sales le of mail pouches and small boxess Sale of non-standardized boxesExplanation / Answer
(a)
Weighted average contribution margin ratio = (0.8*0.2) + (0.2*0.7)
= 0.3
Total breakeven sales = Fixed costs / Weighted average contribution margin ratio
= 12,238,000 / 0.3
= 40,793,333
Sale of mail pouches and small boxes = 40,793,333 * 80% = 32,634,666
Sale of non-standardized boxes = 40,793,333 * 20% = 8,158,667
(b)
Weighted average contribution margin ratio = (0.4*0.2) + (0.6*0.7)
= 0.5
Total breakeven sales = Fixed costs / Weighted average contribution margin ratio
= 12,238,000 / 0.5
= 24,476,000
Sale of mail pouches and small boxes = 24,476,000 * 40% = 9,790,400
Sale of non-standardized boxes = 24,476,000 * 60% = 14,685,600
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