Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
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 | $ | 825,000 | $ | 550,000 | $ | 275,000 | ||
| Variable expenses | 495,000 | 385,000 | 110,000 | |||||
| Contribution margin | 330,000 | 165,000 | 165,000 | |||||
| Traceable fixed expenses | 144,000 | 72,000 | 72,000 | |||||
| Segment margin | 186,000 | $ | 93,000 | $ | 93,000 | |||
| Common fixed expenses | 64,000 | |||||||
| Net operating income | $ | 122,000 | ||||||
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.
(For all requirements, round your intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar.)
Homework Answers
1. Dollar sales for company to break even = (Traceable fixed expenses + Common fixed expenses) / Overall CM ratio
Dollar sales for company to break even = ($144,000 + $64,000) / 0.40
Dollar sales for company to break even = $520,000
2. Dollar sales for a segment to break even = Segment traceable fixed expenses / Segment CM ratio
Dollar sales for a segment to break even = $72,000 / 0.30
Dollar sales for a segment to break even = $240,000
3. Dollar sales for a segment to break even = Segment traceable fixed expenses / Segment CM ratio
Dollar sales for a segment to break even = $72,000 / 0.60
Dollar sales for a segment to break even = $120,000
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