Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement shown below:
|
Total Company |
North | South | ||||
| Sales | $ | 900,000 | $ | 675,000 | $ | 225,000 |
| Variable expenses | 630,000 | 540,000 | 90,000 | |||
| Contribution margin | 270,000 | 135,000 | 135,000 | |||
| Traceable fixed expenses | 132,000 | 66,000 | 66,000 | |||
| Segment margin | 138,000 | $ | 69,000 | $ | 69,000 | |
| Common fixed expenses | 57,000 | |||||
| Net operating income | $ | 81,000 | ||||
Required:
1. Compute the companywide break-even point in dollar sales.
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2. Compute the break-even point in dollar sales for the North region.
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3. Compute the break-even point in dollar sales for the South region.
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1. Break even point is a point where there is no profit or loss.
Break-even point(in sales dollar)= Fixed cost/ Contribution margin ratio
Fixed cost= 132,000+57,000
= 189,000
Contribution margin ratio= 270,000/900,000
= 0.3
Break even point(in sales dollar)= 189,000/0.3
= 630,000
2. Fixed cost= 66,000
Contribution margin ratio= 135,000/675,000
= 0.2
Break even point(in sales dollar)= 66,000/0.2
= 330,000
3. Fixed cost= 66,000
Contribution margin ratio = 135,000/225,000
= 0.6
Break even point (in sales dollar)= 66,000/0.6
= 110,000
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