Question

Buskirk Enterprises has two divisions, a Farm Division and a Garden Division, and reported the following information for its most recent year:

                                                                        Total               Farm               Garden

            Sales                                                    $265,000         $163,000         $102,000

            Variable expenses                               105,390           63,570             41,820

            Contribution margin                            $159,610         $99,430           $60,180

            Traceable fixed expenses                    110,000           68,000             42,000

            Segment margin                                  $49,610           $31,430           $18,180

            Common fixed expenses                     31,800

            Net operating income                          $17,810

1. What is Buskirk’s overall break-even in sales dollars?

2. What would the company’s overall net operating income be if it operated at its two division’s break-even points?

Answer 1

1) Calculation of the Company's Overall Break-Even in Sales Dollars:
Break even sales in dollars = Totla fixed costs / Contribution margin ratio
Contribution margin ratio = sales - variable costs / sales
Sales	265000
variable expense	105390
Contribution margin ratio = 159610/265000*100				60%
Total fixed expense = 110000+31800				$ 141,800.00
Break even sales in dollars = 141800/60%				$        235,430
2 If the Company Operates at the Break-Even Points for its Two Divisions, it will not Cover its Common Fixed Expenses of $31800