Question

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 $ 900,000 100.0% 486,000 54.0% 414,000 46.% 201,600 22.4% 212,400 23.6% 144,000 16.0% 68,400 7.6% Office Chicago Minneapolis $ 180,000 100% $ 720,000 100% 54,000 30% 432,000 60% 126,000 70% 288,000 40% 93,609 52% 108,000 15% $ 32,400 18% $ 180,000 25% Exercise 7-16 Part 1 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? Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Req 10 Compute the companywide break-even point in dollar sales. (Round "CM ratio" to 2 decimal places and final answer to the nearest whole dollar amount.) Break-even point in dollar sales

Answer 1

Break even point = Fixed cost/Contribution margin ratio

Breakeven point = (201,600+144,000)/46% = 751,304

Chicago office = 93,600/70% = 133,714 Minneapolis office = 108,000/40% = 270,000

Greater than