Piedmont Company segments its business into two regions—North and South. The com
ID: 2463995 • 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:
Total
Company North South
Sales . . . . . . . . . . . . . . . . . . . . . . . . . $600,000 $400,000 $200,000
Variable expenses . . . . . . . . . . . . . . . 360,000 280,000 80,000
Contribution margin . . . . . . . . . . . . . . 240,000 120,000 120,000
Traceable fixed expenses . . . . . . . . . . 120,000 60,000 60,000
Segment margin . . . . . . . . . . . . . . . . . 120,000 $ 60,000 $ 60,000
Common fixed expenses . . . . . . . . . 50,000
Net operating income . . . . . . . . . . . . . $ 70,000
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
Explanation / Answer
1. The companywide break-even point is computed as follows:
Dollar sales for company to break even
=
Traceable fixed expenses + Common fixed expenses
Overall CM ratio
=
$120,000 + $50,000
0.40
=
$170,000
0.40
=
$425,000
2. The break-even point for the North region is computed as follows:
Dollar sales for a segment to break even
=
Segment traceable fixed expenses
Segment CM ratio
=
$60,000
0.30
=
$200,000
Dollar sales for company to break even
=
Traceable fixed expenses + Common fixed expenses
Overall CM ratio
=
$120,000 + $50,000
0.40
=
$170,000
0.40
=
$425,000