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Pack-and-Go, a new competitor to FedEx and UPS, does intra-city package deliverles in seven major metropolitan areas. The performance of Pack-and-Go is measured by management as (1) dellvery time (relative to budgeted delivery time), (2) on-time delivery rates (defined as agreed-upon delivery date/time plus or minus a specified cushion), and (3) percentage of lost or damaged deliverles. In response to competitive pressures. Pack-and-Go is evaluating an investment in new technology that would improve customer service and dellvery quality, particularly in terms of items 2 and 3 above. The annual cost of the new technology, for each of the seven metropolitan areas serviced by Pack-and-Go, is expected to be $80,000. You have gathered the foliowing information regarding delivery performance under both existhg operations and after implementing the new technology: Based on a recent marketing study commissioned by Pack-and-Go, the company estimates that each percentage point increase in the on-time performance rate would lead to an annual revenue increase of $10,000. The average contribution margin tatio for packages delivered by Pack-and-Go is estimated as 40%. 1. From a financial perspective, what would be the estimated net change in annual operating profit if the company makes the propose Required: investment? (Negative amount should be indicated by a minus sign.) 2. Based on the data collected by Pack-and-Go, the company is fairly confident about the reduction in costs associated with lost or damaged packages. However, because of uncertainties in terms of pricing in the markets in which Pack-and-Go operates, it is less. sure about the predicted increase in revenues associated with the implementation of the new technology. What is the breakeven increase in annual revenue that would justify the investment in the new technology

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