Question

Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...

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.

Dollar sales for company to break-even

2. Compute the break-even point in dollar sales for the North region.

Dollar sales for a segment to break-even

3. Compute the break-even point in dollar sales for the South region.

Dollar sales for a segment to break-even

Homework Answers

Answer #1

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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