Question

# Therrell Corporation has two divisions: Bulb Division and Seed Division. The following report is for the...

Therrell Corporation has two divisions: Bulb Division and Seed Division. The following report is for the most recent operating period: Bulb Division Seed Division Sales \$ 231,000 \$ 154,000 Variable expenses \$ 60,060 \$ 32,340 Traceable fixed expenses \$ 161,760 \$ 70,840 Common fixed expense \$ 29,460 \$ 19,640 The common fixed expenses have been allocated to the divisions on the basis of sales. Required:

a. What is the Bulb Division’s break-even in sales dollars?

b. What is the Seed Division’s break-even in sales dollars?

c. What is the company’s overall break-even in sales dollars?

a.

Break even sales = Traceable fixed expenses / Contribution margin ratio

Contribution margin ratio = Contribution margin / Sales

Contribution margin ratio = \$170,940(\$231,000-60,060) / \$231,000 = 74%

Break even sales = \$161,760 / 74% = \$218,594.595 or \$218,595

b.

Break even sales = Traceable fixed expenses / Contribution margin ratio

Contribution margin ratio = Contribution margin / Sales

Contribution margin ratio = \$121,660(\$154,000-32,340) / \$154,000 = 79%

Break even sales = \$70,840 / 79% = \$89,670.8861 or \$89,671

c.

Company overall break even sales = Total fixed expenses / Contribution margin ratio

Contribution margin ratio = \$170,940+121,660 / \$231,000+154,000

Contribution margin ratio = \$292,600 / \$385,000 = 76%

Company overall break even sales = (\$161,760+70,840+29,460+19,640) / 76%

Company overall break even sales = \$281,700 / 76% = \$370,657.895 or \$370,656

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