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 given: Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Net operating income Total Company $ 487,500 100.0% 263,250 54.0% 224,250 46.0% 109,200 22.4% 115,050 23.6% 78,000 16.0% $ 37,050 7.6% Office Chicago Minneapolis $ 97,500 100% $ 390,000 100% 29, 250 30% 234,000 60% 68,250 70% 156,000 40% 50.700 52% 58,500 15% $ 17,550 18% $ 97,500 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

1-a.
Break-even point in dollar sales = ( Traceable fixed expenses + Common fixed expenses not traceable to offices ) / Contribution margin ratio = ( 109200 + 78000 ) / 46%	406957

1-b.
	Break-even point [ Traceable fixed expenses / Contribution margin ratio ]
Chicago office [ 50700 / 70% ]	72429
Minneapolis [ 58500 / 40% ]	146250

1-c.
Sum of break even point of Chicago and Minneapolis = 72429 + 146250	218679
Company wide break even point	406957
Annswer : Greater than