Question

Required information [The following information applies to the questions displayed below.] Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices-one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is givern Office Chicago Total Company 344,250 293,25046.08 Minneapolis Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income $637,500 100.0% $127,500 54.0838, 250 89,250 66,300 100% $510,000 306,000 204,000 100% 60% 40 30% 70 52% 18% 76,500_ 158- 142,800 150,450 23.6% $ 22,950 102,000 22.4% $ 127,500 25% 16.0% $ 48,450 7.6% Required 1-a. Compute the companywide break-even point in dollar sales 1-b. Compute the break-even point for the Chicago office and for the Minneapolis office 1-c. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points

Answer 1

Break-even point in unit dollars = Fixed expenses / Contribution margin ratio

	Total company	Chicago office	Minneapolis
Total fixed expenses	$142,800+$102,000 = $244,800	$            66,300	$          76,500
Contribution margin ratio	46%	70%	40%
Break even point in dollar sales	$                                       532,173.91	$      94,714.29	$ 191,250.00

Total company break-even point is greater than Chicago and Minneapolis break-even

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