Exercise 65 Companywide and Segment BreakEven Analysis LO65

Exercise 6-5 Companywide and Segment Break-Even Analysis [LO6-5) Segnent margin e break-even point in dollar sales. k-even point in dollar sales for the North region. 3. Compute the break-even point in dollar sales for the South region. to

Solution

Solution: 1. Dollar sales for company to break-even $700,000 2. Dollar sales for North segment to break-even $390,000 3. Dollar sales for South segment to break-even $97,500 Working Notes: 1. Dollar sales for company to break-even $700,000 Dollar sales for company to break-even = (Traceable FE + Common FE) /Overall CMRatio Company Traceable Fixed expenses = $156,000 Company Common Fixed expenses = $68,000 Company\'s Overall CMRatio = company Contribution margin /Total company sales =370,000/$1,156,250 =0.32 Dollar sales for company to break-even = (Traceable FE + Common FE) /Overall CMRatio =($156,000 + $68,000)/0.32 =$224,000/0.32 =$700,000 2. Dollar sales for North segment to break-even $390,000 Dollar sales for North segment to break-even = (Segment Traceable FE) /Segment CMRatio Company North segment Fixed expenses = $78,000 North segment CMRatio = North segment Contribution margin /Total North segment sales =$185,000/$925,000 =0.20 Dollar sales for North segment to break-even = (Segment Traceable FE) /Segment CMRatio =78,000/0.20 =$390,000 3. Dollar sales for South segment to break-even $97,500 Dollar sales for South segment to break-even = (Segment Traceable FE) /Segment CMRatio Company South segment Fixed expenses = $78,000 South segment CMRatio = South segment Contribution margin /Total South segment sales =$185,000/$231,250 =0.80 Dollar sales for South segment to break-even = (Segment Traceable FE) /Segment CMRatio =78,000/0.80 =$97,500 Please feel free to ask if anything about above solution in comment section of the question.