e19 8 rathke delivery is a rapidly growing delivery service 541921

E19-8 Rathke 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 10% contribution margin). The other 20% of its revenue came from delivering non-standardized boxes (which provides a 60% contribution margin). With the rapid growth of Internet retail sales, Rathke 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?