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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 156,000 78,000 78,000 Segment margin 174,000 $ 87,000 $ 87,000 Common fixed expenses 69,000 Net operating income $ 105,000 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.)

Sagot :

anthougo

Answer:

Piedmont Company

1. Companywide break-even point in dollar sales

= $562,500

2. Break-even point in dollar sales for the North region

= $260,000

3. Break-even point in dollar sales for the South region

= $130,000

Explanation:

a) Data and Calculations:

Contribution format segmented income statement:

                                               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            156,000           78,000         78,000

Segment margin                           174,000        $ 87,000      $ 87,000

Common fixed expenses             69,000

Net operating income              $ 105,000

Contribution margin ratio = Contribution margin/Sales

=  $330,000/$825,00 = 0.40

For the north = $165,000/$550,000 = 0.30

For the south = $165,000/$275,000 = 0.60

Break-even point in dollar sales = Fixed cost/Contribution margin ratio

Companywide break-even point in dollar sales = $225,000/0.40

= $562,500

Break-even point in dollar sales for the North region = $78,000/0.30

= $260,000

Break-even point in dollar sales for the South region = $78,000/0.60

= $130,000

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