Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown:
Total Company | North | South | ||||||
Sales | $ | 812,500 | $ | 650,000 | $ | 162,500 | ||
Variable expenses | 552,500 | 520,000 | 32,500 | |||||
Contribution margin | 260,000 | 130,000 | 130,000 | |||||
Traceable fixed expenses | 134,000 | 67,000 | 67,000 | |||||
Segment margin | 126,000 | $ | 63,000 | $ | 63,000 | |||
Common fixed expenses | 54,000 | |||||||
Net operating income | $ | 72,000 | ||||||
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.
1. Company wide, Break Even point in dollar sales.
For whole company,
Total fixed costs
= traceable fixed expenses+common fixed expenses = $134000+$54000 = $188000.
Contribution margin ratio
= (contribution margin ÷ sales)×100% = ($260000÷812500)×100 = 32%
BREAK EVEN POINT ( IN $ )
= TOTAL FIXED COSTS ÷ CONTRIBUTION MARGIN RATIO
= $188000 ÷ 32%
= $587500.
2. North Region, Break even point in dollar sales.
For north region,
fixed costs = $67000
Contribution margin ratio
= (Contribution margin ÷ sales )×100 = ($130000 ÷ $650000)×100 = 20%
BREAK EVEN POINT ( IN $ )
= $67000 ÷ 20%
= $335000.
3. South Region, Break even point in dollar sales
For south region,
fixed costs = $67000
Contribution margin ratio
= (Contribution margin ÷ sales)×100 = ($130000÷$162500)×100 = 80%
BREAK EVEN POINT ( IN $ )
= $67000 ÷ 80%
= $83750.
_____×_____
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Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
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