Question

Cullumber 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, Cullumber believes that there are great opportunities for growth in the delivery of non-standardized boxes. The company has fixed costs of $ 13,824,900. The sales mix is determined based upon total sales dollars.

(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?

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?

Total break-even sales
$

Sale of mail pouches and small boxes
$

Sale of non-standardized boxes
$

Answer 1

Cullumber 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, Cullumber believes that there are great opportunities for growth in the delivery of non-standardized boxes. The company has fixed costs of $ 13,824,900. The sales mix is determined based upon total sales dollars. 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?