Question

Combe Corporation has two divisions: Alpha and Beta. Data from the most recent month appear below:

	Alpha			Beta
Sales	$	165,000		$	283,500
Variable expenses	$	107,250		$	170,900
Traceable fixed expenses	$	89,100		$	87,700

The company’s common fixed expenses total $86,500. The break-even in sales dollars for Alpha Division is closest to:

Multiple Choice

• $501,714

• $247,143

• $254,571

• $78,500

Answer 1

Given Data for Alpha Division :

Sales = $ 165,000

Less : Variable Expenses = $ 107,250

Contribution Margin = $ 57,750

Traceable Fixed Expenses = $ 89,100

Contribution Margin Ratio = Contribution Margin / Sales * 100 =  $ 57,750 / $ 165,000 * 100 = 35%

Break-Even Sales for Alpha Division = Traceable Fixed Expenses / Contribution Margin Ratio

Break-Even Sales for Alpha Division = $ 89,100 / 35%

Break-Even Sales for Alpha Division = $ 254,571 (Option - C)