Exercise 6-10 Companywide and Segment Break-Even Analysis [LO6-5] Crossfire Comp
ID: 2339219 • Letter: E
Question
Exercise 6-10 Companywide and Segment Break-Even Analysis [LO6-5] Crossfire Company segments its business into two regions-East and West. The company prepared the contribution format segmented income statement shown below Total Company East West Sales S 1,040,000 $650,000 $390,000 Variable expenses Contribution margin Segment margin Common fixed expenses Net operating income 140,000 676,000 442,000 234,000 364,000 208,000 156,000 Traceable fixed expenses 148,000 64,000 84,000 216,000 $144,000 72,000 76,000 Required 1. Compute the companywide break-even point in dollar sales (Round intermediate calculations to two decimal places) 2 Compute the break-even point in dollar sales for the East region. (Round intermediate calculations to two decimal places) $ 200,000 3. Compute the break even noint in dollar sales for tha Wast 0 Type here to searchExplanation / Answer
Answer 1.
Companywide:
Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $364,000 / $1,040,000
Contribution Margin Ratio = 35%
Fixed Expenses = Traceable Fixed Expenses + Common Fixed Expenses
Fixed Expenses = $148,000 + $76,000
Fixed Expenses = $224,000
Breakeven Point in dollar sales = Fixed Expenses / Contribution Margin Ratio
Breakeven Point in dollar sales = $224,000 / 0.35
Breakeven Point in dollar sales = $640,000
Answer 2.
East Region:
Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $208,000 / $650,000
Contribution Margin Ratio = 32%
Breakeven Point in dollar sales = Traceable Fixed Expenses / Contribution Margin Ratio
Breakeven Point in dollar sales = $64,000 / 0.32
Breakeven Point in dollar sales = $200,000
Answer 3.
West Region:
Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $156,000 / $390,000
Contribution Margin Ratio = 40%
Breakeven Point in dollar sales = Traceable Fixed Expenses / Contribution Margin Ratio
Breakeven Point in dollar sales = $84,000 / 0.40
Breakeven Point in dollar sales = $210,000