Exercise 6-10.docx - Exercise 6-10 Companywide and Segment Break-Even Analysis[LO6-5 Crossfire Company segments its business into two regions\u2014East and

Exercise 6-10.docx - Exercise 6-10 Companywide and Segment...

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Exercise 6-10 Companywide and Segment Break-Even Analysis [LO6-5] Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 750,000 $ 500,000 $ 250,000 Variable expenses 525,000 375,000 150,000 Contribution margin 225,000 125,000 100,000 Traceable fixed expenses 140,000 60,000 80,000 Segment margin 85,000 $ 65,000 $ 20,000 Common fixed expenses 70,000 Net operating income $ 15,000 Required: 1. Compute the companywide break-even point in dollar sales. CM Ratio = Contribution Margin / Sales = $225,000 / $750,000 = 0.3 or 30% Total Fixed Costs: Traceable: 140,000 Common: 70,000 210,000 Break-even in Dollars = $700,000 2. Compute the break-even point in dollar sales for the East region. CM Ratio = Contribution Margin / Sales = 125,000 / 500,000 = 0.25 Traceable Fixed Expenses: 60,000 Break-even in dollars = 240,000 3. Compute the break-even point in dollar sales for the West region. CM Ratio = Contribution Margin / Sales = 100,000 / 250,000
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  • Fall '15
  • Western United States, Crossfire Company

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