Piedmont Company segments its business into two regions—North and South. The com
ID: 2393308 • Letter: P
Question
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement shown below:
Required:
1. Compute the companywide break-even point in dollar sales.
2. Compute the break-even point in dollar sales for the North region.
3. Compute the break-even point in dollar sales for the South region.
TotalCompany North South Sales $ 900,000 $ 675,000 $ 225,000 Variable expenses 630,000 540,000 90,000 Contribution margin 270,000 135,000 135,000 Traceable fixed expenses 132,000 66,000 66,000 Segment margin 138,000 $ 69,000 $ 69,000 Common fixed expenses 57,000 Net operating income $ 81,000
Explanation / Answer
1. Break even point is a point where there is no profit or loss.
Break-even point(in sales dollar)= Fixed cost/ Contribution margin ratio
Fixed cost= 132,000+57,000
= 189,000
Contribution margin ratio= 270,000/900,000
= 0.3
Break even point(in sales dollar)= 189,000/0.3
= 630,000
2. Fixed cost= 66,000
Contribution margin ratio= 135,000/675,000
= 0.2
Break even point(in sales dollar)= 66,000/0.2
= 330,000
3. Fixed cost= 66,000
Contribution margin ratio = 135,000/225,000
= 0.6
Break even point (in sales dollar)= 66,000/0.6
= 110,000
Thank you