Question

Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the...

Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period:

Total Company Southern Division Northern Division
Sales $ 267,000 $ 154,400 $ 112,600
Variable expenses $ 90,908 $ 57,128 $ 33,780
Traceable fixed expenses $ 126,800 $ 55,600 $ 71,200
Common fixed expense $ 53,400 $ 30,880 $ 22,520

The common fixed expenses have been allocated to the divisions on the basis of sales.

The Northern Division’s break-even sales is closest to:

Homework Answers

Answer #1
Answer:
Northern Division’s contribution margin ratio
         = ( Sales (-) variable Expenses ) / Sales
         = ( $ 112,600 (-) $ 33,780 ) / $ 112,600
         =    70%
Northern Division’s break-even sales
         = Traceable fixed expenses / Northern Division’s contribution margin ratio
         =   $ 71,200 / 70%
         =    $ 101,714
Northern Division’s break-even sales    =    $ 101,714
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