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Express Delivery

Price: $1.99


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
$12,000,000.

Instructions
(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?

(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?

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